Ford better positioned to ride out recession

Dan Carney • E-mail

The Big Three in Detroit are fighting for a piece of the bailout pie.

General Motors Corp., Chrysler LLC and Ford Motor Co. are lobbying for $25 billion from the government to help them survive the automotive industry’s worst financial crisis.

GM and Ford reported Nov. 7 that they hemorrhaged cash in the third quarter. GM, the nation’s largest automaker, said it lost $2.5 billion and also suspended talks to acquire rival Chrysler. Ford posted a $129 million loss in the third quarter and said it will eliminate another 2,260 jobs. It burned through $7.7 billion in cash.

The Senate plans to take up the cause of the distressed automakers on Monday.

Ford — perhaps more than its two domestic competitors — may be in a better position to weather the economic storm despite dire times in the automotive industry.

Ford's cash position
The Dearborn, Mich., carmaker says it has the cash to survive 2009 and reach the hoped-for economic turnaround.

There is good reason to suspect that Ford is not just whistling past the junkyard. Most immediately, Ford is not in danger of running out of money in the coming months. Two years ago, then-new Ford president and CEO Alan Mulally lined up $24 billion worth of financing, mortgaging the company’s name to build a war chest bigger than anyone thought would be needed, just in case.

That move now looks prescient, though it was primarily done because Ford ran out of money sooner than GM and Chrysler did. “In hindsight that was a very smart move by Mr. Mulally,” observed Tom Libby, senior director of industry analysis at J.D. Power and Associates. “It gives Ford an advantage financially.”

“I think Ford will be in excellent shape,” said Peter DeLorenzo, editor-in-chief of the Detroit insider Web site Autoextremist.com. “Mulally made the tough calls that the other CEOs refused to make — he understood that Ford had to get smaller before it could better — and Ford will be better positioned in the marketplace in the 2010-2011 time frame because of it.”

And to the notion that Ford was plain lucky on the timing of its loans? “Mulally may have lucked out on the financing deal, but then again you have to make your own luck in this business at times,” DeLorenzo said.

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