Saturday, December 13, 2008
The Ford Paradox
While following all of the various stories on the auto industry, I was stumped by one aspect of the proposed bailouts. While GM and Chrysler say they need money right now, Ford has said they will only need federal money if one of the other companies fail. Why would that be? It would seem that if one of the others fail, it would be a great opportunity for Ford to grab up new market share.
Yesterday's article about the auto suppliers in the New York Times finally made things clear to me. All of the car companies rely on the same suppliers, and if one of the Big 3 falls, it will drag down these essential suppliers, and thus handcuff Ford from continuing production.
The irony of this is that one of Henry Ford's great achievements was the incredible Rouge Plant, where raw ingredients went in one end, and a car out the other-- the antithesis of today's supplier-dependent companies.
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These "essentisl" suppliers are already or have previously been though Chapter 11s themselves. Think Delphi and Visteon, both of which used to be a part of these behemoths. Let's not kid ourselves, we are not talking about Chapter 7s here. Ford or GM or Chrysler would do better in an 11 than with a loan from the USG; they could obtain DIP financing; shed their debt for pennies on the dollar and emerge less weak than they are today.
# posted by 
: 9:41 AM
: 9:41 AM
The problem arises when these three go through chapter 11 and get to shed their debt. The small and even larger supplies are owed money, when the 3 don't have to pay, the suppliers go under.
I really wish I had a solution to the problem, but at this point I'm not in favor of a bailout.
I sometimes think that the economy will just have to go through a really bad period and we will come out of it leaner and stronger as we have in the past.
I really wish I had a solution to the problem, but at this point I'm not in favor of a bailout.
I sometimes think that the economy will just have to go through a really bad period and we will come out of it leaner and stronger as we have in the past.
# posted by : 10:43 PM
: 10:43 PM
Of the "Big Three" though, I really think Ford is not a bad company now. They have a couple of hybrids, their cars are not HALF as hideous as a lot of GM's and almost all of Chrylser's. Of the three, I hate Ford the LEAST. I cannot explain why, maybe its a Grosse Pointe thing? I mean SOME of their cars I think are just STUPID looking like the FLEX but look at how they bought Volvo and DID NOT mess it up too badly. You cannot say the same about GM did to Saab.
If a person put a gun to my head I would buy a ford I guess Esp if it were a choice between them and the other two.
If a person put a gun to my head I would buy a ford I guess Esp if it were a choice between them and the other two.
The trouble is, of course, that regardless of what happens, the millionaire white collar upper management will walk away with obscenely large golden parachutes. The suppliers, the workers, the folks at the local dealerships, they'll all pay the heaviest price. How come everyone keeps talking about more cuts from the auto workers and none from mid-level or above management?
Robert
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Robert
# posted by : 12:42 AM
: 12:42 AM << Home
