Bailout Watch 31: Ford: The Loan That Dare Not Speak Its Name
Last Friday, at the celebration of the Model T’s 100th anniversary, Bill Ford kept referring to the $50b federal loan guarantee proposal in the most oblique manner possible. “I’m very happy that both presidential candidates have endorsed this,” Ford said, as reported by the The International Herald Tribune. “The leaders of both parties are embracing this as something that they believe in, so that’s got to help us.” Billy’s once-heir apparent Mark Fields shared the non-nomenclature: “This is not about benefiting Wall Street like maybe some of the other actions that have been taken. This is benefiting Main Street, the working men and women. The auto industry is part of the backbone of the U.S. economy.” OK, so that brings us to today’s article in Automotive News [sub], where Ford CEO Alan Mulally has announced to the world that FoMoCo is “ready” for the bailout loans. “The only conversation we have now is, what is the right way to finance, and what is the right provision for deciding which companies participate,” Mulally opined. “We are very positive.” And that’s it. No wait. “I absolutely don’t think it’s a bailout.” And “We are in very good shape as far as liquidity.” That said, Mulally stressed that “current conditions” are the toughest he has seen in his nearly four decades in U.S. industry. Really? C’mon. I thought Boeing was on the ropes when Big Al took over. And what about the LAST energy crisis? And if liquidity’s so great, why borrow from the feds? These guys want to play it both ways: we need the money and we don’t need the money. That’s so annoying.
ComfortablyNumb on Sep 08, 2008
What happens with these loans in the case of bankruptcy? For a GM or Ford C11 filing, the repayment of the loans would likely just be a provision of their reorganization. But what if Chrysler goes into C7? Cerberus paid $7.4bil for 80% of Chrysler, so extrapolating, Chrysler is worth about $9bil; much less than their one third share of $50bil. Unless there are some heavy cover-our-ass clauses in those loan guarantees, the government is setting themselves up for a major shafting.
Morea on Sep 09, 2008
Re: Boeing My understanding is that Boeing outsources major components of aircraft production to foreign firms in order to secure sales from the airlines of those nations. This makes some business sense, especially when dealing with export-driven nations. Also, Boeing does not wish for the Japanese (or others) to begin making large passenger aircraft themselves so they throw subcontracting business to those countries. Boeing only has one competitor in Airbus. Remember that larger businesses like to have barriers to keep small, upstart players out of the game. Boeing is using the outsourcing strategy as one method to thwart the creation of competitors. (OK, back to cars.)
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