What about Ford?

[GRG55]

Re: What about Ford?

...Fiat walked away with $2B from GM last time they partnered up. I have a strong belief Marchionne will win big from this situation. No one can be a global player without the USA's 30%+/- of the global market. With his play with Chrysler and GME he can jump to #5 on the list. With a little luck he can move up to #2 which seems to be his long term goal.

Living in the middle of this crisis I have an insiders view. What's interesting to me is what people outside the industry think.

I completely agree. In all this chaos there is opportunity writ large for Marchionne and Fiat. Small cars are an extremely competitive market globally. I suspect that it is not his intention to try to sell lots of Fiats to North Americans [a very tough assignment - how many iTulip members would go out tomorrow and shell out for a small car with an Italian badge? Even our Lukester owns a German small car, not a Fiat ], but to secure familiar brands and distribution in North America and Europe that expand the Fiat offering.

If he can make the deals, it'll still be interesting to see how this works out...isn't this somewhat similar to Ford's now failed strategy of acquiring brands around the world [although Ford concentrated on low volume, "premium" manufacturers such as Jag/Land Rover/Volvo instead of the volume manufacturers that Marchionne targets].

BTW, Marchionne is a dual Canadian and Italian citizen and is familiar and experienced in the North American business environment. His three degrees are from Canadian universities and he's a CA who spent almost 2 decades living in North America before returning to Europe in the mid-90s. He shouldn't have the same cultural difficulties with Chrysler that Daimler seemed to have.

Finally, I disagree with the post two above showing Canada a some sort of winner. The amount of money the Canadian taxpayers are pouring into this thing per job "saved" is ludicrous. A well known Canadian fund manager made a good point yesterday...not one of the politicians would put a single dollar of their own personal money into Chrysler or GM, but they do not hesitate to shovel other people's money into them.

[GRG55]

Re: What about Ford?

Nobody, other than the totally deluded, could or would think that "...all those Chrysler plants temporarily closed will reopen? Same for GM...".

The point is that there will continue to be too much capacity because of the government's support. Less than before. But still too much.

Unless the government finds it is unable to have its way, and the secured creditors ultimately prevail...

Chrysler Non-TARP Lenders Object to Auction Plan

May 4 (Bloomberg) -- A group of Chrysler LLC’s secured lenders is seeking to block the bankrupt company’s plan to sell its business at auction this month, arguing that the U.S. government is violating federal law to preserve the automaker.

The group, calling itself Chrysler’s non-TARP lenders, in reference to the Troubled Assets Relief Program, seeks to block the proposed sale to an alliance led by Fiat SpA, as well as a request by the U.S. automaker for approval of a $4.5 billion Treasury loan to finance the reorganization.

Secured lenders that agreed to the Fiat deal, including JPMorgan Chase & Co., Citigroup Inc. and Goldman Sachs Group Inc., had conflicts of interest because they had also accepted TARP funds, the group said.

The process is “tainted” because it was dominated by the government, the lenders argued in papers filed today in U.S. Bankruptcy Court in Manhattan...

...The sale “improperly attempts to extinguish their property rights without their comment,” attorneys for the objecting lenders wrote in court papers.

“The sale motion should be denied because it seeks approval of a sale that cannot be approved under the bankruptcy code,” they argued. “The court should not permit a patently illegal sales process to go forward.”...

Maybe Itulipers see this, but the alternative is not saleable...

Scott4139: I am not sure what you mean by this? Are you implying that the solution sponsored [imposed?] by the government is the only one that is "saleable"?

Seems to me that secured lenders have a good case in law. And trampling over the law of the land is a slippery slope towards tyranny for any nation, as that infamous line from Act IV, Scene II of Shakespeare's Henry VI reminds us...

[fliped42]

Re: What about Ford?

Scott4139: I am not sure what you mean by this? Are you implying that the solution sponsored [imposed?] by the government is the only one that is "saleable"?

Seems to me that secured lenders have a good case in law. And trampling over the law of the land is a slippery slope towards tyranny for any nation, as that infamous line from Act IV, Scene II of Shakespeare's Henry VI reminds us...

Couldn't agree with you more. And just to clarify I do not think the canadian taxpayer is a winner but the Canadian Government who will be able to exert control over means and methods of production through direct ownership and board representation. Although the smaller stake will not give them and loud voice they will be at the table. Hence Small Winner. Also for all the talk about saving jobs the rank and file working union members are also losers as they will get much lower compensation packages then the retired or soon to be retired workers in the best case and most likley be laid off if the factory's do not reopen as Scott4139 has said in the worst and most probable case. The union winners are the bosses and the retired workers.

[cobben]

IRA: "Should Washington & Wall Street Take a Lesson from Bill Ford?"

The IRA looks at banks, that is their business, and this article is really about the banks.

I find this is a rather interesting outsider view of the motor-industrial debacle using a traditional banking perspective.

________________________________________________


Should Washington & Wall Street Take a Lesson from Bill Ford?
April 23, 2009
http://us1.institutionalriskanalytic...ry.asp?tag=355

" . . .
But on to the main course. Last week, after we were done with nearly an hour of blissful economic dialog with Tom Keene on Bloomberg Radio, we ended with a thought about William Clay Ford, Chairman of Ford Motor Co. (NYSE:F). We recalled the 2005 Annual Meeting in Wilmington, DE, when Billy Ford patiently managed the flow of shareholders and activists who come each year. But near the end of the meeting, Bill's cousin Charlotte stood up and, with tears in her eyes and speaking on behalf of the entire Ford family, declared her support.


"This company means everything to us," she said. "We had no idea when you took over in 1999 that the industry would become so cutthroat and so difficult. We put all of our trust in you six years ago and you have it today."


Those were pretty dark days for F, Billy and the Ford family, and the entire industry. But following that nadir, Bill Ford did two things that proved decisive. First, he restructured F financially, raising cash when it was available and, in effect, placing the entire risk of the enterprise with his creditors. Every asset that could be leveraged was levered so that today the creditors pretty much have divided up all of the available collateral.


Second, he hired Alan Mulally from Boeing in 2006, placing the operational restructuring of F in the hands of a tough, competent outsider with no ties to the past management team. By taking the risk of reaching outside the sometimes overly insular F family, Bill Ford breathed new life into the enterprise begun and grown by Henry and Edsel Ford, and cared for by Henry II and a long line of Ford Men like James Couzens, Ernie Breech, and Lee Iacocca, essential outside leaders of whom Mulally is the most recent. And today all of the departed Ford Men would probably say to Billy Ford: "Well done."


Watching General Motors (NYSE:GM) and its former affiliates like Delphi and GMAC twist in the wind, the difference in position now enjoyed by F seems remarkable compared with several years ago. Who would have predicted two years ago that F would be the survivor in the North American auto market? With a government imposed deadline facing GM, its bond holders and the recalcitrant unions, it appears that the predictions of GM being the default winner were wide of the mark. More, perhaps the other troubled financials and industrials should look at the key decision that has saved F from the current financial mess, namely a financial restructuring that has essentially given the economic ownership of F to its creditors.
. . . "

[fliped42]

Re: What about Ford?

Have a look at Ford's balance sheet. That says it all...

The bailouts of Chrysler and GM just perpetuate the maintenance of far too much auto manufacturing capacity...in North America and around the world. Ford is in an unenviable position as a result of these bailouts.

The conventional view of analysts [and the government I suspect] is that US automobile sales cannot remain at current "depressed" levels for very long because "people have to replace their cars". This is a ridiculous bit of nonsense predicated on the assumption that the average fleet age cannot for long deviate from the averages seen in the past decade or so. I don't buy it. Contrary to popular opinion the quality and durability of North American made vehicles is much improved over the 1970s, and all those used SUVs, despite their gas guzzling reputations, are still much, much cheaper to keep on the road than to replace, even if that replacement is more fuel efficient vehicle. In an evironment of 15% to 20% U3 unemployment, I don't have any difficulty imagining the fleet age average increasing, and staying higher for years to come. If Cubans can keep their 1950s Chevrolets and Fords running to this day, Americans should have no difficulty squeezing 15 years or more out of their mid-2000 Yukons, F150s and even their Toyotas, Subarus and Bimmers.

Seems the Government read your post an is hard at work to correct the problem.
Obama, lawmakers agree on "cash-for-clunkers" bill

• 1 hr 42 mins ago

WASHINGTON (Reuters) – President Barack Obama and Democratic lawmakers reached agreement on Tuesday on a legislative proposal designed to stimulate U.S. auto sales, which have fallen to near 30-year lows.
The one-year plan crafted by members of the U.S. House of Representatives would offer vouchers worth up to $4,500 for owners to replace their less fuel efficient vehicles for models that get better gas mileage.
The goal of the "cash for clunkers" legislation is to sell 1 million vehicles.
"By stimulating consumer demand for new vehicles, this proposal will directly benefit domestic autoworkers and automotive manufacturers, which have arguably been hardest hit by the current economic downturn," said Rep. John Dingell, a Michigan Democrat and staunch industry ally.
House Majority leader Steny Hoyer has embraced the proposal and said in an interview with Reuters in April that the measure would be acted upon quickly once proposed.
(Reporting by Matt Spetalnick, John Crawley and Rick Cowan; Editing by Richard Chang)





http://news.yahoo.com/s/nm/20090505/...energy_autos_4

[cjppjc]

Re: What about Ford?

Finally, I disagree with the post two above showing Canada a some sort of winner. The amount of money the Canadian taxpayers are pouring into this thing per job "saved" is ludicrous. A well known Canadian fund manager made a good point yesterday...not one of the politicians would put a single dollar of their own personal money into Chrysler or GM, but they do not hesitate to shovel other people's money into them.

What a great point.

[Scott4139]

Re: What about Ford?

Saleable plan meaning a plan Obama can push through, bully pulpit style. I think the courts will block his plan, however. We'll have to see how that plays out.

[Scott4139]

Re: What about Ford?

Like I've stated before, there is too much open capacity in the auto industry. GM, Ford and Chrysler took full advantage of the supply base by capitalizing on this fact. Prices fell quickly as everyone fought for the available business to keep their plants running. This process has been playing out over the last couple years with a few strong players picking up the pieces from the weak ones. When we're through this shakeout there should be enough pricing power and volume to make a profit for the survivors. Now the irony here is the OEM Purchasing departments played this game with incredible skill, while the executive management either ignored or missed the exact same thing with global auto capacity. Who saw this comming???

“By the time we finish with this in the next 24 months, as far as mass-producers are concerned, we're going to end up with one American (carmaker), one German of size; one European-Japanese … one in Japan, one in China and one other potential European player,” Marchionne told Automotive News Europe on December 8.

Well Mr. Marchionne, let me introduce you to Obamanomics.

[GRG55]

Re: IRA: "Should Washington & Wall Street Take a Lesson from Bill Ford?"

The IRA looks at banks, that is their business, and this article is really about the banks.

I find this is a rather interesting outsider view of the motor-industrial debacle using a traditional banking perspective.

________________________________________________


Should Washington & Wall Street Take a Lesson from Bill Ford?
April 23, 2009
http://us1.institutionalriskanalytic...ry.asp?tag=355

" . . .
But on to the main course. Last week, after we were done with nearly an hour of blissful economic dialog with Tom Keene on Bloomberg Radio, we ended with a thought about William Clay Ford, Chairman of Ford Motor Co. (NYSE:F). We recalled the 2005 Annual Meeting in Wilmington, DE, when Billy Ford patiently managed the flow of shareholders and activists who come each year. But near the end of the meeting, Bill's cousin Charlotte stood up and, with tears in her eyes and speaking on behalf of the entire Ford family, declared her support.


"This company means everything to us," she said. "We had no idea when you took over in 1999 that the industry would become so cutthroat and so difficult. We put all of our trust in you six years ago and you have it today."


Those were pretty dark days for F, Billy and the Ford family, and the entire industry. But following that nadir, Bill Ford did two things that proved decisive. First, he restructured F financially, raising cash when it was available and, in effect, placing the entire risk of the enterprise with his creditors. Every asset that could be leveraged was levered so that today the creditors pretty much have divided up all of the available collateral.


Second, he hired Alan Mulally from Boeing in 2006, placing the operational restructuring of F in the hands of a tough, competent outsider with no ties to the past management team. By taking the risk of reaching outside the sometimes overly insular F family, Bill Ford breathed new life into the enterprise begun and grown by Henry and Edsel Ford, and cared for by Henry II and a long line of Ford Men like James Couzens, Ernie Breech, and Lee Iacocca, essential outside leaders of whom Mulally is the most recent. And today all of the departed Ford Men would probably say to Billy Ford: "Well done."


Watching General Motors (NYSE:GM) and its former affiliates like Delphi and GMAC twist in the wind, the difference in position now enjoyed by F seems remarkable compared with several years ago. Who would have predicted two years ago that F would be the survivor in the North American auto market? With a government imposed deadline facing GM, its bond holders and the recalcitrant unions, it appears that the predictions of GM being the default winner were wide of the mark. More, perhaps the other troubled financials and industrials should look at the key decision that has saved F from the current financial mess, namely a financial restructuring that has essentially given the economic ownership of F to its creditors.
. . . "

This is without a doubt the most ridiculous piece of claptrap analysis that I have read in quite some time. Ford has pledged to its creditors absolutely everything of any value in the company, down to and including the blue oval.

Anybody can see that Ford's situation includes:

• a gawd-awful balance sheet, with far too much leverage in a de-levering world;
• an unsustainable burn rate;
• the same debt deflation induced market challenges that face all the world's automakers;
• the same pattern bargaining union [UAW] pay and benefit levels that are now being forcibly reduced at Chrysler and GM;
• the same perception to fight that Big 3 cars are of lower quality;
• the disposition at fire-sale prices of the "premium" auto brands it purchased in much better times;
• the spectre of a post-bankruptcy Chrysler and GM, both smaller, and both with much better balance sheets than Ford.

Whoever wrote this must be the President of the Bill Ford fan club...:rolleyes:

[GRG55]

Re: What about Ford?

Like I've stated before, there is too much open capacity in the auto industry. GM, Ford and Chrysler took full advantage of the supply base by capitalizing on this fact. Prices fell quickly as everyone fought for the available business to keep their plants running. This process has been playing out over the last couple years with a few strong players picking up the pieces from the weak ones. When we're through this shakeout there should be enough pricing power and volume to make a profit for the survivors. Now the irony here is the OEM Purchasing departments played this game with incredible skill, while the executive management either ignored or missed the exact same thing with global auto capacity. Who saw this comming???

“By the time we finish with this in the next 24 months, as far as mass-producers are concerned, we're going to end up with one American (carmaker), one German of size; one European-Japanese … one in Japan, one in China and one other potential European player,” Marchionne told Automotive News Europe on December 8.

Well Mr. Marchionne, let me introduce you to Obamanomics.

Anybody paying any attention understood there is far too much capacity, and this situation has existed for many, many years.

Part of the reason is that auto manufacturing remains one of those activities that politicians deem "essential" to national manufacturing development and, perhaps, national prestige. For decades there has been a steady accumulation of auto manufacturing capacity around the world. India, China, Malaysia, the Southern US States, even Iran, deemed it necessary to subsidize the creation of more car manufacturing.

Six years ago I did something quite rare [for me]. I bought a new vehicle...a GMC Sierra pick-up for my wife [to haul her horse trailer]. At the time the cash rebate was $3000; if I had waited just one more month the rebate increased to $4000. Today that same model of GMC has a $10,000 rebate for a cash buyer and, net of rebate, actually sells for less in nominal and real terms than what I paid.

How could the executives not understand six years ago that if they have to offer cash rebates there must be too many vehicles coming out of the factories? I cannot believe they did not understand.

BTW: That GMC Sierra was the first GM in my family, and has turned out to be a fine, fine vehicle. More comfortable, more reliable, with equivalent hauling/towing capability to the string of [used] Ford pick-ups I have owned over time. It's now got well over 100,000 miles, and we expect to keep it in daily use for another 10 years or more. I am certain my full-life ownership costs per mile will be lower than most people get from their high-mpg "economy" cars and hybrids...