GM and Chrysler Bankruptcies Cause Ford Worries About Competing

June 2, 2009

If you've thought about the General Motors and Chrysler bankruptcies for even a minute, ramifications for Ford Motor Company quickly surface as a big, "Hmmmm, wonder how that's gonna work out."

Certainly, the folks at The Glass House (Ford's Dearborn, Michigan HQ) have been wondering. And wringing their hands. As reported in Automotive NewsFord is calling for the U.S. government to maintain a level playing field for all auto manufacturers. It may be too late for that.

"The reality is, if you're competing against a company that's majority owned by the U.S. government, that does raise certain concerns about what the competitive dynamic will be for the industry," Ford spokesman Mark Truby said. "So we're hoping we can work with the administration and the task force to be heard on those issues as this progresses." Making sure that the government's ownership of GM is just a short-term proposition is one important consideration, Truby said.

Other reports about the GM bankruptcy have cited government officials, including President Obama, as stating that the U.S. Treasury will divest its GM holdings as quickly as possible, thereby relinquishing the most public (visible) level of control. That would help bring the competitive situation back into a more natural free-market balance, but for now, Ford is definately on the up side of the tetter totter with its feet dangling in the air.

Ford is particularly concerned about:

  • The health of its supply chain; if key suppliers who service Ford and also GM and/or Chrylser tank, this negatively impacts Ford by stopping their production
  • GM and Chrysler's lower cost of financing because of TARP dollars that have bolstered GMAC's ability to offer low-cost financing that Ford's credit arm can't match because it didn't take federal funds
  • GM and Chrysler's ability to funnel taxpayer money into bigger incentives
  • Mega dealers who own multiple franchises of all brands; with GM and Chrysler shedding so many stores, this may also force the closing of some Ford dealerships because the larger dealership holding companies may be forced to close. Between GM and Chrysler, close to 2800 dealerships could be shuttered.
  • Going-out-of business pricing by closing GM and Chrysler dealerships impacting short term sales

"We want as level a playing field as possible, and we want to make sure we're as competitive as we possibly can be," Truby said. "And if that's the case, with our new products, we'll be fine. We can win as long as there's a relatively level playing field."

Unfortunately, the playing field isn't level now. Things are tipped in favor of GM and Chrysler. And the scales will tip more out of Ford's favor after GM and Chrysler emerge from their individual chapter 11s. Both companies will have lower cost structures than Ford, giving them a huge edge going forward. Ford continues to introduce new and improved products as they march forward. On their own.

[Automotive News]

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