Ford Motor Co. & bail-outs: true or false


#1

I have been hearing a rumor for a while now, that Ford is the only auto maker in the U.S. that has not taken any of the Fed’s bail-out money. Is this true?



Ya’ll may have answered this question before, but if anyone has the answer, please refresh my memory.—Thanks


#2

It’s true.


#3

Of the big three, Ford is the only one to not take any of the bail-out money. Both Chrysler and GM took bail out money to avoid bankruptcy.


#4

I just have to wonder why you ask. Looking for a new car and trying to decide on company?

It may or may not make a difference to the reason you ask, but you could also modify the question to something like “how many companies still owe money, and how much?” The public perception seems to be that these were straightforward “handouts” - but much of the TARP $$ was basically emergency loan intended to be paid back with interest. A lot of the money has been paid back.

Good luck, of course, figuring out what has been paid back and on what terms but a lot of it has come back.


#5

Well, yes, that was why I was asking. I’m not in the market yet (and may never be) for a new car/truck, but if I do decide to buy a new one, I believe the fact that they haven’t taken the money will convince me to buy a Ford.

Of course, I also feel like, since it was MY tax dollars at work with the bail-out, I should receive a new GM or Chrysler. Loan or not. I don’t expect it to be paid back.


#6

Why would you expect a new car? Also the money has to be paid back no matter if you expect it to or not.


#7

You should base your car purchase decisions on: 1) Is it a good car?, 2) Will the company be in business for the life of my car?, 3) Is the car sold in suffucient volume that parts (from OEM or aftermarket) will be available? If you look at these, GM would qualify, but Chrysler (even with Fiat’s help) has a very uncertain future.

Consumer Reports advises against buying most Chrysler products because of their poor repair record. They would not recommend against a car just because it has goverment ownerhip.

As mentioned, Ford decided it did not need the bailout money and wanted to avoid Uncle Sam and the Canadian Government on their board. Instead, Mullaly, who saved Boeing after the 9/11 aviation downturn, mortgaged the whole comany and set about making all the cuts that Bill Ford was too timid to make. He also disposed of Jaguar, Land Rover and other losers.

Many US and Canadian car buyers went to Ford for that reason, but Ford has now refocused on actually being serious about building CARS in North America. Their quality has also gone up considerably, to where I would not hesitate to buy a Ford Fusion, for instance.

I agree that most of that bailout money may never be repaid, but that in itself should not keep you from buying a car from these firms.


#8

I think it’s reasonable to ask if whether or not a car company has taken a bail out and make a decision based on that information.

However, I think it’s funny how people take this into consideration but then take out an auto loan from the bank with the lowest interest rates, regardless of whether this bank took money from the fed. In reality, the bank that’s financing the car probably received even more bailout money than GM or Chrysler and is going to make more profit financing a new car, than the car company that made it.

I have family members who are adamantly opposed to GM & Chrysler because of the bailouts but they didn’t think twice about getting a mortgage from a bank that received bailout money.


#9

“As mentioned, Ford decided it did not need the bailout money and wanted to avoid Uncle Sam and the Canadian Government on their board.”

I was under the impression that Ford decided to restructure just a few months before the banking crash, back when loan money was still available. If this decision had been even slightly delayed, they would have been in the exact same boat as GM & Chrsyler.


#10

Excellent point. As far as I’m concerned, if you want to try to steer clear of companies that have used their size to mangle the public interest, I think that you’ll only find some small local businesses that fit the bill. Of course, then there isn’t much in the world that you can actually buy.


#11

kb; good observation. Mulally was brought in to fix up Ford, and he raised enough cash by mortgaging the whole company (even the blue oval logo) and got about $34 billion in workig capital. He then set out on the savage cost cutting and rationalization program.

He joined the other chiefs in going to Washington, mostly out of solidarity and maybe some tax concessions. When the US (90%) and Canadian (10%) governments came up with their guaranteees, he backed out, but asked for a line of credit (similar to Chrysler under Lee Iacocca )in case Ford needed it. It turned out to be unnnecessary, and Mulally will be the hereo at Ford the Iacocca was at Chrysler in the 80s.

Agree; Ford was way ahead in doing what needed to be done, while the other two very slow to react and needed to go through Chapter 11 with goverment help.


#12

“I have family members who are adamantly opposed to GM & Chrysler because of the bailouts but they didn’t think twice about getting a mortgage from a bank that received bailout money.”

Most of the time, all you really know about your mortgage is who loaned you the money. The mortgage is bundled and sold to raise more cash to make even more loans. If the loan originator is conservative, they can make a good living and not ruin the credit market. But for most of the last 10 years, the loan mortgage shops were increasingly crazy with their loan practices.


#13

I remember hearing about one person at work who had had the same mortgage company for 29 years. In the last year of their mortgage, the bank holding it changed 10 times.


#14

The so-called “bail-outs” are loans, not gifts, and the companies that borrowed the money are paying them back. Since these loans are not interest free, the U.S. Government is making a profit on them.

That being said, Ford didn’t need a loan from the government because they did well in retooling and planning for the recession, but that doesn’t mean their cars are any better than anyone else’s.

If you choose a car based on your political ideology, instead of the quality of the car, that is your prerogative, but I think it is in your interest to choose the best car that meets you needs.


#15

I agree with the method of choosing a car based on needs and not solely on their bailout receipts. However, if Ford took the time and effort to retool their company, vise waiting for a bailout, it seems to speak volumes on the company’s character. That’s just my oponion, though.

I also feel that, all of the manufacturer’s are close to the same as far as quality goes. Don’t they all have to comply with the same standards (safty being primary)? Besides, they all get their parts made in China now, and then assemble them here…right?

As for how to pay for one,I also choose not to take a loan from a bank that also took Gov. bailout money.To be on the safe side, I’m planning ahead and saving up so I can present cash…it may take 30 years to do it, but I can wait.


#16

Like ccooper, I think that it is only responsible to think more broadly about what and/or whom one is supporting when one goes to the market to meet one’s narrow self-interest needs.

There isn’t a single thing that is wrong or even strange about trying to be a “socially responsible consumer.” The legend has it that corporate capitalism - which is NOT run democratically - is actually “democratic” in part b/c consumers “vote” with their pocketbooks. Well, why not “vote” with lots of things in mind beyond narrowly defined individual self interest (the best value that I can get for my dollar).

That said, as I noted above, I don’t see anyone out there who is “clean”


#17

Agree with ccooper that you should buy a car based on your actual needs, not who makes it or who got bailout $$.

However, ccooper should realize that there still is a vast difference in quality and durablility in the car world, in spite of uniform SAFETY standards. An Italian Fiat will meet all the US safety standards, but has a much shorter life expectancy that a Honda or a Mazda, for instance. Some cars also need more frequent repairs even if they can be made to last long. Governments only specifiy life expectancy when it comes to emission controls and the batteries in California-sold hybrids.

A copy of the Consumer Reports Buying Guide reveals a great deal about historical reliability. Also ask any taxi driver or fleet operator which cars are a no-no becuase of reliability problems. I will buy you a dinner for two if you can show me a picture of a Jaguar taxi.

The same holds true for major appliances; they all have the UL label on the bottom, which means they meet US safety standards. However, some last one year while others soldier on for 10 or more. We own several German Braun appliances. These items never seem to wear out, whereas we have worn out 5 electric kettles, made by various other manufacturers, over the last 10 years.


#18

Agreed. But I still have this idea (and I’m sure it’s not true)that all makers, with the exception of BMW and maybe a few others,have their parts made in the same factory. And there is some guy/gal that stamps one for Ford, GM, Honda, ect., ect. So unless you want to spend BIG money for the hand made one-of-a-kind, your stuck with the standard quality car.

All that being said, it boils down to my hard headedness,and cast my “vote” as a consumer.
Well said, cigroller.


#19

ccooper; you need a factual primer on how the car business works. Agree there are parts manufacturers like Magna International, who make parts for various vehicles. Those parts are basically designed and specified as to quality by the car manufacturer. The parts manufacturer may do the detail design, however.

The size and strength of that part is the manufacturer’s decision. A Honda part made in Japan or the USA will have Six Sigma quality, i.e. one bad part ofr every 300,000 or so. The strength and durability of the part will be a Honda spec.

The overall vehicle, if Honda or Toyota, etc. will be subject to a Failure Mode and Effect Analysis (FMEA) that will determine the overall acceptable reliability. This type of thing has all happened here in the last 20 years or so. Prior to that quality was a hit and miss proposition, and a large number of parts made by US suppliers were rejected!

Lucas Electric, the British supplier to Jaguar and others, had a 30%!!! rejection figure at the manufacturing stage, and a lot more failed prematurely in the cars. Japanese electrical components tend to almost last the life of the car, by comparison.

Many US parts suplliers initially could not meet Honda and Toyota quality levels; they now do most of the time. The company that made the Toyota accelerator pedals obviuosly did not.

Your “hardheadedness” prevents you from understanding that quality and durability is a decison by the manufacturer. The really good ones can and do make sure they 1) design it right, 2) get the suppliers to manufacture it right, and 3) build it right.

So, your “standard quality” theory is just that, a half baked theory.

I have a Panasonic 50" plasma TV made in Mexico from parts made all over the world, including the US. Panasonic has the best quality rating in the elctronics buysiness. I don’t care who made the parts, because the overall process described above made sure the end product is right.

When you buy a cheap electrical appliance at Walmart, you may be right that one Chinese manufacturer makes that item for several companies around the world.

I’m sending you this post from a Dell laptop made in Penang, Malaysia from components made all over Asia. My other computer is a Dell 8200 desktop, also a great machine made from parts from all over. Michael Dell has to decide what kind of company and products he wants to identify with. He basically sets the standards, not his parts manufacturers.

P.S. The electronics on a BMW are NOT designed by Japanese or US companies, and as a result are considerably LESS reliable than those in the cheapest Japanese econobox! Many other BMW parts are poorly designed as well resulting in a vehicle with little resale value as it ages.


#20

"Most of the time, all you really know about your mortgage is who loaned you the money. "

Absolutely, but even if a bank bundles and sells your mortgage the day after you close on your house, it still made a hefty sum on funding fees (1-2% of the mortgage). The amount is likely significantly more than a typical car company makes on a non-luxury vehicle. It’s just incredibly hard to find a bank that didn’t get money from the fed.

To further complicate the auto bailouts, is the fact that many Japanese and European auto companies also received “cash infusions” and guaranteed loans by their respective nations. If somebody boycotts any auto company that got a bailout of any kind, it would be a very complicated matter finding one that didn’t receive some kind of government subsidy from their home countries. If you add in local and state subsidies, I doubt there’s a single auto plant in the USA that didn’t get some sort of incentive to setup shop where they did.

If this is a serious consideration for somebody, probably the best bet would be to buy a used auto and use only aftermarket parts for repairs.