By on April 15, 2010

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].

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27 Comments on “Ford Bashes GM’s Opel Bailout Begging...”

  • avatar

    No US government aid = US supply chain #$%&’ed up

    • 0 avatar

      Yes, but would you really argue that supporting the supplier sector would have been more expensive/less efficient than propping up GM and Chrysler?

    • 0 avatar

      But how would the US suppliers survive if GM and Chrysler were gone?

    • 0 avatar

      Do all of the supplier’s need to survive? The suppliers and parts companies could have been just as poorly managed as GM and Chrysler, but as we don’t evaluate their products directly or associate them with who actually made them, how would we know?

      If I ran a supplier whose primary income came from making some part unique to Hummers, and there was suddenly no longer a demand for Hummers, it’s not GM’s fault alone for messing up the Hummer brand, it’s my fault for not diversifying my company.

      A lot of money could have been saved by supporting the suppliers vital to Ford and other solvent automakers’ businesses, and letting those dependent on GM and Chrysler go down with those ships.

      • 0 avatar

        “A lot of money could have been saved by supporting the suppliers vital to Ford and other solvent automakers’ businesses, and letting those dependent on GM and Chrysler go down with those ships.”

        Many of those suppliers don’t just shop GM exclusively, however GM may have been their biggest client in terms of volume.

        If say for example, you supplied 2 to Ford, 1 to Honda, 3 to Toyota and 15 to GM – GM’s failure would have been devastating even though you wouldn’t have been entirely dependant upon them.

        In in another case, the technology might be proprietary to a particular car manufacturer and they are licensing it to the component manufacturer since the manufacture of that technology is outside the scope of that vehicle manufacturers business and in doing so the component manufacturer is unable to diversify or divesify to a greater extent.

    • 0 avatar

      I think that depends on a large amount of calculations considering income tax revenues from the employees that were saved.

      If GM and Chrysler go down, I think you lose a good amount of suppliers anyway, many who were owned money from GM and Chrysler. But, say you bail them out. Do the remaining auto manufactures have enough capacity in North America to keep the suppliers running after receiving money? I don’t know if anyone really knows the answer to that question. You could end up bailing out an industry that can’t produce enough final products to be sold, causing the suppliers to go under anyway, which probably causes the raw materials industry to have problems as well.

      But, I don’t have a crystal ball. There would have been a good deal of short to medium term pain (5-10 years is my guess) if you let both of them go under. I am not sure bailing out the suppliers would have been too different, since I am guessing there would have been more cars imported to NA to meet the short term demand, which nullifies the effects of bailing out the suppliers.

      Not to say it was the right thing to bail out GM and Chrysler, but I think bailing out the suppliers would have been very difficult to keep tabs on. How many suppliers are we talking about? How do we know which ones to bailout, which ones we don’t? How many more people would the gov’t need to keep tabs on them?

      Honestly, I can’t say it would have been more or less expensive or efficient to bailout the suppliers. If you are going to do a bailout at all, it is probably simpler to do it with GM and Chrysler.

    • 0 avatar

      Steven02: I struggle daily with the temptation to re-fight battles that have already been lost, and as you say, it’s a complicated hypothetical argument to make either way (especially considering we’re still so far from a final pricetag). I just think the supply chain justification for the GM/Chrysler bailouts is weak sauce… who thinks suppliers and local communities didn’t lose out when GM and Chrysler shut down 14 and 8 plants respectively last year, despite the bailout?
      Overcapacity is overcapacity, and no amount of government money can completely repeal the laws of supply and demand. It’s just refreshing to hear Ford Europe strapping on some hoden and saying things like “restructuring your business is your own job and you should pay for it yourself and you should not use taxpayer money.”
      Of course, it’s too bad that the second part of that line appears to be “because we need taxpayer money to pay for more consumer incentives”…

    • 0 avatar

      Your absolutely right about the hypothetical argument, but you also asked the question of what would cost more or be more efficient. So, I thought I would offer my opinion. And absolutely people lost jobs when the plants were closed. I am sure some suppliers went out of business too. And you are correct about over capacity, but a supplier bailout doesn’t fix this problem either. You have now saved suppliers who don’t need to supply as much for cars to be built.

      I do think that the supplier justification for the bailout made a lot of sense though, if you are going to do one at all. While some of the suppliers probably went out of business anyway, it would be interesting to know how many more would have went out of business with GM and Chrysler gone. What would this have done to Ford, Toyota, Honda, and Nissan in North America? Would they have been able to make cars still in North America? Would they be able to make enough for the demand at the time, or would this cause other automakers into layoffs because they can’t get enough products built with smaller amounts of suppliers. That is what I think the bailouts were trying to avoid.

  • avatar

    Ford did its restructuring by mortgaging everything, getting loans. Is the money for Opel loans or something else? I am sure that Ford wants Opel gone in Europe or something else to keep its sales at a decent level. All Euro car companies want that.

    • 0 avatar

      Of course most companies want their competitors gone but what Ford did was basically take the sacrifice of taking out a second mortgage and then working like hell to make sure they can make the payments. I respect that more than the Generous Motorcars watching the abyss coming up and then trying to get a taxpayer parachute before they plunged over the cliff.

  • avatar

    Now, why hasn’t Mulally been saying the same thing for the last two years?

    Because the future is unwritten…and Saint Al could very well be eating those words in 6 months…

    • 0 avatar

      Aside from a meteor smashing into the glass house, what severely bad thing can possibly happen to Ford right now?

    • 0 avatar

      I have to agree with Silvy here…you never know. And it’s not that consumers will care if Ford criticizes then takes money hypocritically (just us really), it’s GM’s legislator friends that will take notice. You want trouble as a company…you make it hard for influential senators to acheive their goals.

    • 0 avatar
      Telegraph Road

      Mulally eating his words in 6 months? Almost six months ago (Oct 26, 2009), Robert Farago wrote in Ford Death Watch 49: “Make no mistake: Ford is still gasping for breath.” Two months earlier Farago had predicted that Ford would be asking for a C11 or a “proper” bailout within 8 months. It’s time for RF to eat his words.

  • avatar
    Uncle Mellow

    European governments want to support Opel/Vauxhall not because GM are popular but because the political and economic consequences of losing GM jobs would be serious.

    • 0 avatar
      Tricky Dicky

      Doesn’t make sense Uncle Mellow. No one is queuing up to give Opel cash. German politicians have got their hands on GM’s throat if anything. UK has made a pre-election promise to give money to support GM in Europe, but it is entirely conditional on all the other European governments providing cash too (highly unlikely). And in 3 weeks when the UK election is over and done with, there are almost no consequences of sticking two fingers up to GM. No cash from Poland and Spain’s coffers are empty with their economy still hugely in crisis.

  • avatar

    How old is this poster, anyway? It’s been quite some time since Bob Lutz worked at Ford, hasn’t it?

  • avatar

    Heh. Six months is a long time. Let’s speculate on the possibilities. A global financial meltdown, that big ass volcano under Yellowstone blows its top, a huge asteroid causes another mass extinction, an unknown bug leads to global pandemic, or some mullah starts nuclear armageddon? About as likely, and I suppose we’ll all be eating our words by then.

    • 0 avatar

      Eh, it’s P71, apparently he thinks that 6 months from now everyone will wake up and suddenly realize all they’ve ever wanted in life was a BOF vehicle with RWD and a pushrod V8 under the hood (not that there is anything wrong with that, it just won’t ever be mass market, and thus matter, again).

  • avatar

    The government story about suppliers was a smokescreen; the purpose of the bailouts was to support the UAW, their pension plans, and their healthcare. Heck, they are still putting line items in the healthcare plan directing federal money to UAW healthcare.

    Having followed the bailout process very closely as a scared s*less Ford retiree, and having friends and neighbors at GM and Chrysler, I reluctantly concluded: 1) bail out GM by giving them loans at similar terms and rates that Ford got in the private sector, 2) let Chrysler go down.

    The part about GM would have been the absolute minimum government intervention to keep GM viable, and although still detrimental to Ford, who had the foresight to get the loans when they could, made a good compromise in my opinion. The part about Chrysler was based on the fact that they were just too far gone – as is being proven out. It made absolutely no sense for my taxes to go to bring a new, foreign player (Fiat) into the already saturated U.S. market to compete with my company.

    I would have softened the blow for Chrysler by changing once and for all the bankruptcy procedures where bondholders and other creditors are given priority over pension holders in distribution of assets in bankruptcy. I view pension funds as a form of 401k, except instead of each person having direct control over their pot of gold it is held in trust by the companies delegated bank. It is case law, rather than specific legislation that allowed others to get dibs on assets ahead of pensioners. United Airlines, for instance, went bankrupt, handed the unfunded pension over to the PBGC, and was reborn days later with the same name and many of the airplanes. The pilots got only about 25 cents on th dollar since the PBGC is a welfare system where low wage earners get a full pension and high wage earners get a fraction.

    I know this would change current assumed contract law, but hey, the whole damn economy melted down so what better time. If you think about it that is what the feds did at GM and Chrysler anyway (screwed the bodholders, maintained pensions), I just want them to do it for all defined benefit plans in the U.s. once and for all, and then make new defined benefit plans illegal. Use 401k’s instead so corporate raiders can’t steal your pension.

    Regarding why Mullaly kept quiet in the U.S., the feds have for some time held the U.S. automakers by the b*lls and can make things painful for them anytime they wish. This is especally true with the new CAFE laws. Don’t believe me; witness Toyota’s problems.

  • avatar

    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.

  • avatar

    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.

    • 0 avatar

      I seem to recall that bankruptcy was “not an option” for GM or Chrysler either, and we can see how that went.

      I’m not saying that Ford is heading for bankruptcy. I’m just saying that the reality of insolvency (at some hypothetical company) isn’t something that can just be wished away by sheer force of will of a CEO or major shareholder/family.

    • 0 avatar

      Eh, of course bk is theoretically an option. Why wouldn’t it be? While it’s true that bankruptcy cannot just be wished away, the specific mix and interests of the stakeholders will influence how much pain is endured through other options to avoid it.

      GM knew that Ford was willing to take on more pain and acted accordingly. So did the government.

      My point only is that, to the Ford family, bk was not an option. Who really cares if some guy at GM (Waggoner) said it was not an option for them. Besides his salary what was his interest?Postulating and grandstanding at best. And maybe just negotiating.

  • avatar

    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.

  • avatar

    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.

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