David Cole: Ford's Debt Adds $1500 to Cost of Every Vehicle
We tore David Cole a new one the other day, when the leader of the manufacturer and union-supported Center for Automotive Research suggested that trimming GM and Chrysler dealers wasn’t such a good idea—based on some schmoozing with his pals. Never let it be said that I won’t trot-out a dubious source when it suits my editorial needs, especially when it comes to bashing Ford. Just kidding. I love Ford. My first three cars were Fords. I want Ford to succeed. I am not, however, blind to the fact that Uncle Sam shoveled $10 billion worth of no-to-low-interest twenty-five year loans in FoMoCo’s direction. Nor am I Detroit News columnist Daniel Howes; I will not predict sunshine and roses simply because there’s a government-sponsored break in the clouds hanging over the Glass House Gang. TTAC commentator Mark MacInnis shares my skepticism, with a nod to Mr. Cole . . .
Amidst all the hoopla yesterday about Ford’s quarterly profit, was this little nugget, which doesn’t bode well for their future. “‘That puts Ford at a competitive disadvantage,’ said David Cole, chairman of the Center for Automotive Research in Ann Arbor, who estimated that servicing Ford’s debt adds more than $1,500 to the cost of every vehicle the automaker sells in the United States.” Now, Ford sells as many or more cars worldwide as they do in the U.S., so the cost advantage per-vehicle is actually less than this hyped number. But it’s still what? A six percent or seven percent cost dis-advantage? That’s BEFORE the labor costs, which are higher than GM since the UAW repudiation of Ford’s contract do-over. And higher than Toyota’s and Honda’s. Still. So, add it up, and Henry’s company has to build vehicles ten percent more efficiently or ten percent more desirable to overcome that debt-related disadvantage. A formidable task. So, before we all start congratulating Ford on dodging the bullet, we better watch out for that ricochet . . .
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Maybe its just me.. But I dont see the same problem involving the debt rising the price of every car. I see it is.. Actually SELLING THE DAMN CAR at the PRICE it went on sale as.. Meaning.. NO REBATES!