Ain't no Fordunate One

Ok, maybe my age is showing a little, but I can't help hearing some Fogerty defiance in the background as I watch the fiasco that our US auto industry has become. Two out of the three US auto makers have a nearly 70 billion dollar advantage over the third thanks to 'we the taxpeople' and it doesn't look like the playing field is going to get any more level any time soon. As a 60% shareholder in GM the government has put itself in the unique position of having a substantial interest in the success of the company and, frankly, an obligation to the tax payers to protect that investment.

Obama has professed to have no interest in managing an auto maker, but it challenges logical analysis to conclude that the government is not going to take an active role in running the company that it just purchased at a fire sale. If the government puts incentives, such as tax advantages, in place for those that buy certain types of cars that 'just happen' to fall within the portfolio of a certain auto manufacture a little more than another, well who can blame them really? But where does that leave Ford? It's hard to tell.

Ford has been in the process of turning it's business around for a few years now. What had looked like a 2009 recovery for the company is now projected to be a 2011 recovery due to the economic slump. Ford's recent lineup of vehicles has been fairly well received and the company has been more proactive than it's US competitors in restructuring debt and reducing costs. The company had a clear advantage over GM and Chrysler before the US government came to the rescue. Now the leadership at Ford is beginning to wonder aloud if they haven't pitted themselves against a competitor backed by the tax-base of the largest economy in the world.

As reported in Automobilemag, Ford spokesman Mark Truby made the following comment on June 1st;

"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. So we're hoping we can work with the
administration and the task force to be heard on those issues as this
progresses."

But that hope is clearly the hope of an outsider asking, with hat in hand, for a seat at the table.

Taxpayer money is also finding its way into GM's financing entity GMAC. Through changes at GMAC the company now services both GM and Chrysler loans and the taxpayer funding provides them with a lower capital cost than their competition. Ford Credit is seeking approval for industrial loan corporation status that would make its capital costs more competitive with GMAC, but they've been trying since 2006.

To add insult to injury there is an increasing clamor for Ford to take part in the government bailout and a growing number of folks questioning Ford's wisdom in not doing so in the first place. A June 2nd Houston Chronicle article tried to cheer up the folks at Ford with the following;

"Perhaps Ford should have taken a government bailout when it had the chance because now, Uncle Sam is the competition.

The government has a responsibility to taxpayers to maximize the return on its investment, and the best way to do that is by crushing the competition, with Ford as the primary target.

Unfortunately for Ford, the government also can write laws that directly affect automakers’ profitability.

Mulally now finds himself in an exclusive, and thankless, executive circle. Call them the Unbankrupt or the Loners of Solvency."

I guess the Chron isn't going to do anything to upset that 'thankless' status.

Between the infusion of government billions into GM and Chrysler, the government having a vested interest in the success of Ford's competition, and Ford's higher cost of capital, the playing field appears to be anything but level for Ford. How they will ultimately fare remains to be seen. Government medling and inefficiency may turn out to be the albatross for GM that it has been for so many other things, and American's sense of fair play may rally consumers to the Ford brand. Consumers are fickle creatures, but there is a growing number of callers to radio shows and commenters on internet news sites swearing to abandon GM and Chrysler in favor of Ford. I hope they mean it.