Ford Bailout Money Unnecessary, Company Says
DEARBORN, Mich. — By shunning government loans, Ford Motor Co.'s top executives say they hope to buff up the automaker's image and set it apart from its cash-starved Detroit competitors, General Motors Corp. and Chrysler LLC.
GM and Chrysler are in desperate need of government money and may not last until the end of the year without it. But Ford set up $23.5 billion worth of credit in 2006, and both Chief Executive Alan Mulally and Executive Chairman Bill Ford Jr. told The Associated Press on Tuesday they are confident that the borrowing, coupled with restructuring and new product plans, will get them through the recession without relying on the government.
Ford even said the century-old company that bears his family's name might be able to use the independence from loans to its advantage.
"I think if they see Ford as a company trying to pull itself up by its own bootstraps, and making it on its own and pulling the right levers, I think that could be a positive for us," Ford said.
Mulally said Ford has completed much of the restructuring that Congress is demanding of the other two, slimming down its brands by selling Jaguar, Land Rover and Aston Martin and studying the sale of Sweden's Volvo.
Ford, he said, has cut its factory capacity to match demand, and it anticipates no further cuts will be necessary as long as the U.S. auto market doesn't worsen considerably. The company has announced the closure of 17 factories and eliminated 50,000 jobs since 2005, many through buyout and early retirement offers.
The interviews came as weary Democratic congressional leaders cleared the final obstacles to a $15 billion bailout of Chrysler and GM. Congressional officials said Wednesday that majority Democrats and the Bush White House finalized a deal that could go to a vote later that day, although stiff opposition lingered among some Republican lawmakers.
Among the requirements in the Democrats' proposed legislation is the appointment of a "car czar" to oversee Chrysler and GM with authority to yank the loans if the companies don't make substantial progress toward restructuring.
Both companies are likely to seek further concessions from the United Auto Workers and their creditors in order to justify the government money and prove themselves viable.
But Mulally said Tuesday he would expect the same concessions from the union even though Ford wouldn't be under government supervision.
"The UAW supports the entire industry. They represent employees at all three companies. I can't imagine being disadvantaged on that," Mulally said. "I would think whatever's done on that we would continue to do together because they support all of us."
Mulally appeared before Congress last week with the CEOs of GM and Chrysler, and said he did so to support the other automakers and to line up a government loan just in case the economy worsened and Ford might needed the money in the future. If one or both of the others go into bankruptcy, it could drag down parts suppliers and force Ford into the same situation, Mulally said.
Mike Moran, Ford's Washington, D.C., spokesman, said Wednesday that drafts of the bailout legislation show Ford would not fall under government supervision unless it actually draws on a federal loan.
Ford wants to set up a $9 billion long-term line of credit from the government but would use it only if the U.S. auto market worsens or fails to recover. The company has said it has enough borrowed money to make it through 2009 without government help.
"From our understanding of the drafts that have been shared publicly, a company that is actually borrowing the money would have to comply under the structure and oversight, but Ford has clearly indicated we aren't going to be requesting any short-term bridge loans from the government," Moran said.
He said Ford would comply with all government conditions if it tapped the loans at a later date.
Mulally said that if Congress required him to step down for Ford to get the money, he would comply with the conditions.
But Ford, the executive chairman, said he would be against Mulally leaving, joking that he might rob a bank to keep the executive he hired away from aviation giant Boeing Co. in 2006.
Mulally said that two years ago Ford took its plan _ similar to the one it submitted to Congress last week _ to 40 banks in an effort to get financing to unify its production system and for research and development. It originally estimated a need for $17 billion, but raised additional funds just in case.
"None of us thought it would go as deep as it was going to go and we would have to use it all," Mulally said. "To finance this transformation of Ford on the production system to match demand and get back to profitability, and finance our accelerated product development. That's what led to doing it and doing it at that time."
Ford said the company is trying to take leadership in fuel economy with direct-injection turbocharged engines, new hybrid gas-electric powertrains and eventually electric vehicles. Competitors, including Chrysler, GM, Toyota Motor Corp. and Honda Motor Co., have or are working on, similar technologies.
"Even when we got into tough times, we kept our R&D spending alive, and it was something that I was personally involved in to make sure we spent in the new technologies that will get us to real modernization," he said.
He said it looks like the country is moving toward electric vehicles as the next generation of transportation, and he called on the government to come up with an energy policy to pick one technology and start building the infrastructure to make it work.
"I don't think we'll ever get the infrastructure built that we need if market forces alone are working. I think that our government has to provide some direction," he said.
Ford also said he'd like to see the government keep gas prices stable with taxes or a floor on crude oil prices so automakers can plan their models better.
Gasoline prices peaked at more than $4 per gallon during the summer but now are well below $2 per gallon in many areas of the country.
"We plan our vehicles three, four, five years in advance," he said. "It makes life very difficult if the market gyrates wildly over the course of several months, and that's exactly what we've seen happen."
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KIMBERLY S. JOHNSON and TOM KRISHER | December 10, 2008 11:54 AM EST |
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