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June 8, 2009

Ford's Reward for Surviving: Much Tougher Competition

Ford Motor Company, the only one of the surviving Big Three to not ask for bailouts or declare bankruptcy now has a new challenge, competing with the federal government. Today's Wall Street Journal outlines how Ford will now have to face a competition that has purged its costs through bankruptcy and $62 billion in federal aid. Imagine, if the competition in the industry you work in just received a fraction of that aid. How would that affect your company? Would you feel secure? I believe that Ford's prospects are not good if the automaker fails to restructure. It is leveraged almost as bad as Chrysler and with the automotive market deteriorating further, the likelihood of an international buyer bailing them out (ala Chrysler) is much less.

Instead of being poised to take a larger market share of a scrambled industry, the propping up of the automotive industry is going to compel Ford to take federal money if the competition becomes too difficult.

By the way, weren't the auto bailouts designed to deter bankruptcy? Between Chrysler and GM (along with $62B in bailout) who didn't declare bankruptcy?

Maybe if they would have done this sooner, they would be better poised to handle a rough sales cycle?

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