Ford: We Don't Need a Bailout, But...

Posted: December 3, 2008

When the Big Three automakers submitted plans to Congress detailing how much federal bailout money each automaker would need and what it would do with the funds on Tuesday, Ford dropped a bomb on GM and Chrysler.  America's oldest automaker said it didn't necessarily need the money.

In a press release, the company explained "Ford is asking for access to up to $9 billion in bridge financing, but reiterated that it hopes to complete its transformation without accessing the loan should Congress agree to make the funds available."  The company asserted that a bankruptcy filing by GM or Chrysler might force it to re-evaluate, adding, "Ford...does not anticipate a liquidity crisis in 2009 - barring a bankruptcy by one of its domestic competitors or a more severe economic downturn that would further cripple automotive sales and create additional cash challenges."

If the automaker does accept a federal loan, ford CEO Alan Mulally says he will work for $1 per year until the loan is repaid.

CNN Money notes, "Mulally had a base salary of $2 million and total compensation of $21.7 million last year, according to the company's filings."

With or without a federal loan, the press release said, the company "is canceling all bonuses to be paid in 2009 for all management employees worldwide and foregoing bonuses for all employees in North America.  The company also will not pay merit increases for North America salaried employees in 2009." 

So what would Ford do with a $9 billion federal loan?

"The company said it will accelerate plans to roll out electric vehicles as part of its plan," according to the AP.  Ford anticipates producing an electric-only Transit Connect cargo van in 2010, with an electric sedan "the size of the Ford Focus compact the following year."

In its press release, the company does depend heavily on government loans approved in an earlier package meant to help the industry create more fuel-efficient vehicles.  Ford claims that "Half of the Ford, Lincoln and Mercury light-duty nameplates by 2010 will qualify as ‘Advanced Technology Vehicles' under the U.S. Energy Independence and Security Act - increasing to 75 percent in 2011 and more than 90 percent in 2014.  Ford said it has included these projects in its application to the Department of Energy for loans under that Act and hopes to receive $5 billion in direct loans by 2011 to support Ford's investment in advanced technologies and products."

The Washington Post notes that Ford "disclosed this morning that it expects to break even or become profitable in 2011."  The company "said it would cut costs further by selling its five corporate aircraft and would explore the possible sale of its Sweden-based Volvo brand," though many analysts say it would be difficult to find a buyer for the struggling Swedish marquee.

While the bailout debate goes on, automakers are trying to sell cars as fast as possible with deep discounts.  Research the best car deals with U.S. News' Car Reviews.