Ford has released its nonclassified report to the Senate Banking Committee today, as CEO Alan Mullaly escapes from Detroit in his Escape hybrid. The Detroit Free Press has posted the entire report in PDF format, and it’s 33 pages of good stuff. The big news: despite insisting that federal funds are a “backstop,” Ford is asking for more money than it did last time Mr. Mullaly went to Washington. Specifically, Ford offers three scenarios, ranging from a short-term recovery (14.5m total US market in 2010 = $5b in support), to normal (12.5m in 2010 = $9b) to short-term worsening (11m units in 2010 = $13b). Ford’s “recommended terms of the loan would be: (i) at government borrowing rates; (ii) a revolving credit line with a ten year duration; and (iii) with additional conditions consistent with the TARP legislation.” When was the last time you “proposed” your own loan terms?
The plan calls for Ford’s senior executives to forgo any salary increases or bonuses in 2009, and beyond “as business conditions warrant” (nothing official to back up Mullaly’s claim to the WSJ that he’d take a $1/year salary to get the loans). Though Ford accepts that loans may be “callable,” it firmly rejects the possibility of any form of ownership change or even grant full seniority to government loans, arguing “A condition of senior status for any government loan could cause lenders or holders of our debt to allege a debt default, which could result in an acceleration of indebtedness and lead to the very result the legislation was designed to prevent, namely, a liquidity crisis.”
On the product front, Mullaly claims half of Ford, Lincoln and Mercury light duty vehicles will meet “Advanced Technology” standards, increasing to 75 percent in 2011 and more than 90 percent by 2014. Unfortunately, this includes “bio-fuels such as ethanol as an important long term solution to our energy needs.” Also, “Should pension investment returns not recover, or continue to deteriorate, government loans could be used to ensure the overall strong funding status of our pension plans.”
9 Comments on “Bailout Watch 224: “Ford respectfully requests… $9b”...”
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Your story states that Mullaly was willing to take $1 to get the loans. However, isnt it that Mullaly would agree to $1 if they actually had to draw from the credit line. Two very different statements. Not sure why you come down so hard on the terms. Citi got very favorable terms that did not destroy investor equity, why should Ford have to suffer by its terms.
“The plan must:. . .
-Provide for specific measures designed to ensure transparency and accountability, including regular reporting to, and information-sharing with, any federal government oversight mechanisms established to safeguard taxpayer investments; protect taxpayers by granting the most senior status for any government loans provided, ensuring that taxpayers get paid back first;
-Assure that taxpayers benefit as corporate conditions improve and shareholder value increases through the provision of warrants or other mechanisms;. . .”
Pelosi/Reid Letter to Detroit
“Though Ford accepts that loans may be ‘callable,’ it firmly rejects the possibility of any form of ownership change or even grant full seniority to government loans, arguing ‘A condition of senior status for any government loan could cause lenders or holders of our debt to allege a debt default, which could result in an acceleration of indebtedness and lead to the very result the legislation was designed to prevent, namely, a liquidity crisis.’”
Hopefully there are enough southern Republican Representatives to call Ford out on its lack of reading comprehension.
Pelosi and Reid asked them to suggest estimates for the loan and terms addressed on Page 22 of the document.
gamper:
Congress approved the $750 Billion TARP bailout; that’s water under the bridge. Fool me once shame on you, fool me twice shame on me.
Maybe Congress should avoid making the same mistake again instead of making the same mistake twice just because of some whiny moral relativity argument.
Ford, GM and Chrysler created this problem by building a house of cards on sloppy, money losing captive financing loans and leases, and now its time to pay the piper. Hell, with GMAC GM was even a co-conspirator in the mortgage crisis.
Without the big-3 providing ridiculous loans and leases Americans cannot buy as many cars as they did in the past.
Also, as many expert, non-biased people have shown, Chapter 11 is best for the automakers in the long run:
http://www.thetruthaboutcars.com/why-detroit-should-stop-worrying-and-learn-to-love-c11/
http://www.thetruthaboutcars.com/editorial-gm-death-watch-219-gm-prepackaged-reorganization/
http://www.nytimes.com/2008/11/19/opinion/19romney.html
http://www.thetruthaboutcars.com/editorial-general-motors-death-watch-213-blueprint-for-a-taxpayer-funded-gm-c11/
I wouldn’t criticize Ford for suggesting loan terms. It is always best to specify what will work, rather than throw up your hands and say “whatever”, because then you are subject to the whims of Congress, and they DO NOT understand your plight as well as you do.
Man this is getting fun and exciting. Folks are pulling out smooth lines. Sporting some complex economics, politics, morals, emotions, and intellect. Can the public keep their best interests in focus? What gaps do the automakers leave between the lines? This is great! Its like playing 21 questions, Chess, Jeopardy, Parcheesi, Dominoes and Monopoly all at once Since I’m having fun, I’ll consider myself a winner of sorts. Considering all the opportunity that everyone of us have to learn to play the game of life better, I come to the conclusion that everyone is a winner of sorts. Congratulations everyone, we bet on Detroit and Won!
I really do mean what I say, even though it can be taken as sarcastic. The lesson learned today will have incredible importance in helping us individually make better decisions going forward. Before these issues, we would have had a hard time perhaps imagination how certain things go down in our country. We won something for our devotion and attention to the system. Although everyone price will be different ie. we will not see eye to eye with everyone in the future either.
“Though Ford accepts that loans may be ‘callable,’ it firmly rejects the possibility of any form of ownership change or even grant full seniority to government loans, arguing ‘A condition of senior status for any government loan could cause lenders or holders of our debt to allege a debt default, which could result in an acceleration of indebtedness and lead to the very result the legislation was designed to prevent, namely, a liquidity crisis.’”
Translated “Nationalize This! You clowns have GM by the pelotas and we’re pretty sure that Chrysler management and the congressional leadership were separated at birth. We guess it is up to you, Nancy and Harry, to choose to back the single US auto maker with the best chance of returning to global success. BTW, Did any of you actually read the TARP legislation before you passed it and sprinted out to start back slapping at the press conference? I didn’t think so, but just because you got scorched for that giveaway, don’t try to overplay your hand on this deal. But hey, show us how smart you really think you are. It is your move.”
Signed, Alan and the gang
PS. No more free rides on the corporate jets,
either.
“Though Ford accepts that loans may be ‘callable,’ it firmly rejects the possibility of any form of ownership change…”
Gotta protect THE FAMILY, eh, Al baby?
“Though Ford accepts that loans may be ‘callable,’ it firmly rejects the possibility of any form of ownership change …”
Al’s gotta protect The Family.