Ford Bashes GM's Opel Bailout Begging
It’s a line of attack that Ford has been careful to avoid in the US, but Ford Europe is lashing out at GM’s request that European governments help finance the restructuring of its Opel division. Businessweek reports that Ford of Europe’s vice president of government affairs Wolfgang Schneider laid into GM’s request for $2b, saying:
Restructuring your business is your own job and you should pay for it yourself and you should not use taxpayer money. We are definitely against any support for Opel. The Europeans have made the choice that they would use their tax money to sustain companies and business and to sustain capacity levels that from an economical point of view are not sustainable. We do not believe that governments will be able to continue that policy forever. Governments run out of money, as well.
Smackdown! Now, why hasn’t Mulally been saying the same thing for the last two years?
GM, meanwhile, is barely fighting back. The company offered only the following justification through a spokesman:
The European Union has specifically set up a framework whereby individual countries are able to support companies that have gotten into economic distress. We’re not asking for special treatment. We’re asking for the guarantees made available for this very purpose
Uh huh. Well, it’s a good thing GM is so popular in Europe right now, since its spokesfolks seem incapable of explaining why propping up unsustainable capacity makes any kind of sense. Hell, they could have at least called Ford hypocrites, as Ford’s Schneider is also requesting “commercial-vehicle discounts or other incentives in a last-ditch effort to soften the coming decline in vehicle sales,” according to The WSJ [sub].
Bankruptcy was not an option for Ford. The family would loose too much. Facing this reality Ford secured lines of credit to stay alive ... at all costs. If bankruptcy had been an option would they have taken it? If you look at the families' control as a constraint ... then remove the constrait ... the answer may very well be yes. That's what the other two elected to do as evidenced by the aggreagate vote of voting stakeholders.
Bankruptcy was never an option for Ford. The family would loose too much. Facing this reality Ford secured lines of credit to stay alive ... at all costs. If bankruptcy had been an option would they have taken it? If you look at the families' control as a constraint ... then remove the constrait ... the answer may very well be yes. That's what the other two elected to do as evidenced by the aggreagate vote of voting stakeholders.
People keep on seemingly forgetting that Ford has massive amounts of debt, even by capital-intensive industrial company standards. Or at least Ford does. If Ford was serious about their own long term survival, they'd probably be best off keeping their collective mouth shut, and go looking for some "handouts" themselves. A few good years, where they've really only done modestly well as it is, does not a turnaround or corporate success story make, especially in the topsy-turvy, volatile and whimsical industry of car making.
Ford's opposition to GM's Opel bailout reminds me of the old political axiom, "Where you stand depends on where you sit." I think everyone understands that. More compelling are the remarks by ControlsGuy. He sums up well the dilemma between principle and practice. Put another way, what is the responsibility of society to save people who believed in foolish promises? As it turned out, "not much" in the case of the (secured, supposedly) bondholders, who foolishly ignored GM and Chrysler's awful balance sheets and falling market shares. In contrast, "a lot" for the UAW, white collar retirees and Rustbelt communities who trusted the gravy train would go on forever. We'll see the same political reflex as public employees demand that their exorbitant pension promises be honored by Uncle Sam. I don't know what ControlGuy's pension is, so I don't know how much sympathy I should have for him. However, if a company is in a desperate situation it seems logical that everyone who holds an unsecured promise (for that is what his defined-benefit pension is) should share in the hardship of making the business viable. Trimming a mid-manager's pension from $160,000 to, say, $100,000 wouldn't be so cruel.