Should the US bailout the big three automakers?

[gsharapa]

Hey Fred,

Maybe it's time for you to put a Toyota engine in your Cobra since you are so fond of them.......buy american!

[Cobrabill]

Now that's a hell of an idea-A Supra engine in a Cobra.It wouldn't sound right or even look right when the hood is up.But it would blow the doors off 99 out of 100 Cobra's.

How about this:Buy "it" because it's a good product.Screw where it was made.

[gsharapa]

Think maybe you should look at the quality data as Ford has passed Honda and on par with Toyota now.........

[gsharapa]

By Sharon Silke Carty, USA TODAY
DEARBORN, Mich. — On this rainy, cold, miserable Tuesday in December, Alan Mulally sits in his office at Ford Motor's headquarters, beaming.
With Ford's (F) sales down 19.5% this year, the economy showing no sign of recovery, and Congress and the White House working on loans to help the domestic auto industry survive, you'd think Mulally would have very little to smile about.

But he's perfectly chipper, showing off a 1903 Indian head penny sent to him by a Ford dealer's son. For luck.

"Isn't that great?" he says, peeling it out of its protective wrapper. "I'm going to keep that in my pocket."

Compared with the other two domestic automakers, Ford looks like it's already been blessed. The automaker has $18.9 billion in cash and $10.7 billion in untapped credit, which Mulally says has his company positioned to survive the market falloff.

That's in stark contrast to General Motors and Chrysler, which say they need billions by this month to avoid filing for bankruptcy court protection.


TENTATIVE DEAL: Congress, White House agree on auto aid
INTERACTIVE GRAPHIC: A state-by-state look at auto industry jobs

Not that Ford isn't hurting: It lost $129 million in the third quarter and says it won't be profitable again until 2010 — at the earliest.

But its cash position puts it in the enviable position of saying it doesn't plan to tap government loans that may be offered. That's not unless things get markedly worse for the overall economy, or if one of its Detroit competitors goes under, disrupting the entire supply system.

Is it luck or good planning that got Ford here?

Jeffrey Sonnenfeld, an associate dean at the Yale School of Management, says Mulally's ability to move quickly and not let ego get in the way have helped the company achieve much more than many expected.

"He has surprised an awful lot of people," Sonnenfeld says. "He's had the courage to say he's largely accelerating a given plan, and he's fortified the top lieutenants around him. He's done a great job working with people who know what he doesn't know about the industry."

Mulally has said his strategy since he left running Boeing to take over Ford two years ago was to speed up the three-step line of attack the company had in place: cut production to match demand; make cars people want; and focus on core brands.

It's not complicated, but it has meant breaking with old Detroit ways of doing things, selling brands people admired and laying off tens of thousands.

Plus, he made one key decision three months into his tenure that set up Ford's cash cushion today. In December 2006, Mulally decided to mortgage all of Ford's assets — plants, buildings, real estate, patents and trademarks, including the Blue Oval — for $23.4 billion in cash.

In a recent speech to the Rotary Club in Seattle, Mulally's hometown, he had the audience laughing when he walked them through the steps of his deceptively simple strategy.

"I know," he said, pausing for dramatic effect. "This is revolutionary."

New way to do business

Sarcasm aside, in some ways that thinking is a big departure from how the Detroit 3 have operated.

For decades, the U.S. carmakers dealt with their high fixed labor and production costs by pumping out more cars, regardless of market conditions. That spruced up their balance sheets, because carmakers book the profit on a car when it leaves the plant and is shipped to a dealer.

At that point, a complicated financing dance begins, with the automaker giving the dealers loans to pay for the cars until they're sold. Then the automakers cough up thousands per car in rebates to persuade consumers to buy the car — ideally, coaxed by interest rate incentives with money borrowed from the automakers' finance arms.

Until recently, the Detroit automakers often made more money in a quarter from their banking operations than from making cars.

Under Ford's plan, revenue won't look as rosy as in the past because demand-driven production totals will be lower. But if that means cars can be sold without costly sales incentives, profits should improve.

"This is a completely new business plan, where we take the hurt," Mulally says. "We are going to be the leader in sizing our operations to the real demand out there. And we'll keep doing it. … No matter when (the market) comes back, no matter what the industry is, we've sized our operations to the real demand."

That's meant fewer jobs at all levels of the company. On Ford headquarters' 12th floor, several offices sit dark and empty following a trimming of upper management. Ford has eliminated 14,000 jobs across all pay levels in the last three years and closed 17 plants, cutting $5 billion in costs.

But being smaller is the only thing that makes sense in this environment, Mulally says, admitting he was a little surprised that industry leaders hadn't approached business this way in the past.

"It was the only thing I knew as a business person," he says. "Clearly, this is a new plan for Ford, and it's working. … We got on this journey, and for the first quarter, before the credit and financial meltdown hit, it was working."

What Mulally says was lacking before he came was "a point of view of the world." The economy was slowing, he says, and had the potential to slow further, making a cash cushion critical. The company view now also includes the assumption that gas prices will rise over the long term and that while consumers still will want a whole range of vehicle sizes, they'll demand category-leading fuel efficiency.

"We developed a point of view about that, and it seems to be working," he says.

Compensation brings criticism

Mulally hasn't been able to avoid public criticism. His starting salary — he earned $28 million in his first four months on the job — raised eyebrows in 2007 as Ford pushed to cut its workforce. And his personal use of company aircraft cost Ford $792,000 in 2007, as he earned $22 million in salary and bonuses.


CEO PAY REPORT: Check your CEO in our interactive chart of pay and stock awards

This year, he'll make a base salary of $2 million, and bonuses have been suspended for all senior managers. Mulally has agreed to take just $1 in salary if Ford taps government credit. But he says he wants to avoid federal loans.

"It's taxpayer money, and we take that very seriously," he says.

Mulally says he went to Washington, D.C., to testify with GM CEO Rick Wagoner and Chrysler CEO Bob Nardelli to show his support and help convince politicians that the industry is important enough to help save. In the process, Ford got lumped in with GM's and Chrysler's woes, sitting through a verbal assault from politicians intent on making the automakers answer for past mistakes.

Even Mulally's mom could see Ford was taking a bruising. Mulally says she watched every minute of the hearings on C-Span, and called him afterward to ask why no one seemed to be listening.

An image at issue

In the long run, the congressional hearings could hurt Ford's image.

Like GM and Chrysler, the automaker has been battling an image problem with consumers. While overall quality has gone up, bringing Ford's quality in line with Toyota's according to one recent study, and fuel efficiency is improving, there's a gap between consumer perception and reality.
"In the court of public opinion, they are all one in the same," says Leslie Gaines-Ross, chief reputation strategist for public relations firm Weber Shandwick. "They're all looking for help. If anything happens to any of those companies, it's going to impact every situation. I think that's how the average consumer looks at it.

"There is so much distrust of companies today that it's very hard to distinguish one company from another," Gaines-Ross says. "But it's certainly possible to change perceptions. … It's just going to be crucial to get the message across."

Jim Farley, group vice president of marketing and communications for Ford, says he's been frustrated by some of the debate in the media about the bailout. "It's one thing for the consumers, but for the mass media and our real thought leaders in the country to literally have a five- to 10-year-old image about where Ford Motor Co. is, it's mind boggling."

Still, he's never seen so much interest in the auto industry. And Farley says he thinks the conversation will change as soon as people delve more into the details about each company.

"It's raising the awareness to a level that we couldn't do with all the marketing money in the world," Farley says. "If GM, Chrysler and Ford joined up tomorrow, we could not get the American public to be as interested in the car companies' health as it is right now."

Farley, who was lured to Ford from Toyota a year ago by Mulally, says he's excited about the future of Ford: Working there is a lot like working at Toyota in the 1980s, when they were working to build their market and persuade people to buy their products.

Farley says Mulally has had a laser focus on his plan, and managed to rally people around his vision.

"He's one heck of a salesman," Farley says. "He has a laser focus that hasn't changed one iota."

[Cobrabill]

[quote=gsharapa;Think maybe you should look at the quality data as Ford has passed Honda and on par with Toyota now.........[/QUOTE]

Wow,and after only 32+ years.But don't feel bad,it took GM 50+ years to get the Corvette right.

[Bobcat]

So it took 32 + years .... at least one of the companies got the message , and if the other post is correct , Ford is in a position to make it without the "help" from the Wonderful Imperial Federal Government . If the Pols get their hands on the car companies , we are talking about a black hole for our tax money and the kiss of death for the companies involved .
It is beyond my comprehension that politicians who screwed everything up think they can come up with a workable solution .... when they caused the vast majority of the problems over the years with their regs and mandates etc .
If this package , which stinks to high heaven , goes through ... let`s at least hope they put Mitt Romney in charge/overseer instead of some moronic Bureaucrat .

[Rick Weber]

I always get a chuckle about the "quality" issue. JD Powers is always about "INITIAL QUALITY". So the quality is good when you first put in the key? What about 3-4 yrs. later? After that period, the Fords, GM's I have owned have shown their age rather poorly. The Japanese cars I have owned have remained bullet-proof during that same time line and beyond. No electrical gremlins, no squeaks/rattles, no burning of oil. Would love to return to Detroit to buy a car but my opinion of their vehicles has soured. Maybe was just my bad luck.

Rick

[Tom Kirkham]

Thanks

Here are two links: Both are eye openers.

http://online.wsj.com/article/SB122670755063129989.html

http://online.wsj.com/article/SB122818170073571049.html

[RedBarchetta]

I just picked up this tidbit from a Reuters feed on the Big 3 bailout vote in Congress:

"Pushing to convert skeptics in both parties, Democrats agreed to drop at least one unrelated provision that threatened to sink the measure, a congressional official said. They were eliminating a pay raise for federal judges after Democratic Sen. Claire McCaskill of Missouri, who represents an automobile manufacturing state, announced she would oppose the carmaker aid unless that provision was removed."

WTF do pay raises for federal judges have to do with a Big 3 stimulus package? Exactly...nothing! You would think this Congress would stop the pork barrel politics during the WORST of Economic Times?!? Heck no! I would love to read that entire bill and see what else Pelosi, Reid and the other Hitler youth are jamming into this one?!? Unbelievable! And "at least one" tells me there are a whole lot more in there.

If we had a biased media the inserters of that provision would have been tarred and feathered by now. Instead, it gets gently swept under the carpet and buried within one line of one article. Truly pathetic, isn't it?

-Dean

[Bobcat]

Tom ... Rick Perry was the other Governor .... I just couldn`t remember his name . Sanford and Perry are two lonely voices that will probably be lost in the mad scramble to destroy this country with debt and government control .
This whole scenario is almost a mirror image of what Ayn Rand wrote many years ago in Atlas Shrugged .... and that isn`t good ( Paulson is the modern Wesly Mooch ). Thanks for finding the articles .
Red ... agree 100 % . Where is an honest press/media who will do the job they are supposed to do and not be the Democrats lapdogs ?
I guess the only thing we can do now is make our feelings known very pointedly to our Congressman/women and Senators ... and keep doing it .
Fortunately , the SC Governor already has started to bring this out . Let`s hope people listen .

[jmc]

Originally Posted by RedBarchetta

I just picked up this tidbit from a Reuters feed on the Big 3 bailout vote in Congress:

WTF do pay raises for federal judges have to do with a Big 3 stimulus package? Exactly...nothing! You would think this Congress would stop the pork barrel politics during the WORST of Economic Times?!?


-Dean

Is this a true attempt to give judges a pay raise (pork barrel politics) or a throw away that will readily be dropped to get agreement on the overall bill??

[RedBarchetta]

Originally Posted by jmc

Is this a true attempt to give judges a pay raise (pork barrel politics) or a throw away that will readily be dropped to get agreement on the overall bill??

To me, it doesn't matter. WTF was it doing on this emergency appropriations bill in the first place?!? This bill is about saving GM's ass for another 45 days and nothing else. That's all the bill should have contained.

If people like this worked at my company (employer), they all would have been fired a long time ago.

[Ron61]

The last thing I heard was that there was more than one Pork Addition to the bill. But now they can start over according to this article.

http://news.yahoo.com/s/politico/16515

Ron

[RedBarchetta]

[Jamo]

Senate Republicans are doing what management and the Democrats are too pussified to do...make the UAW commit to doing what is necessary to keep their jobs.

This is squarely at the UAW's feet now.

[Don]

Part of the initiative for the long term resolution of the economic challenges should be the resignation of Senator Dodd ( D-CT ) as Chairman of the Senate Banking Committee. After approx 6 + months he still has not released the terms of the VIP mortgage obtained from Countrywide, i.e., "waiting for the appropriate time . " The Senate Ethics Committee has not concluded their investigation, which has been underway for months, regarding the mortgage.

Yet, considering CT voting patterns, more than likely Senator Dodd will be re-elected.

[1ntCobra]

Originally Posted by Jamo

Senate Republicans are doing what management and the Democrats are too pussified to do...make the UAW commit to doing what is necessary to keep their jobs.

This is squarely at the UAW's feet now.

Hmm, Senate Republicans have opened up the situation so that the White House puts out billions of dollars with conditions to be determined later by the incoming Congress?

[Don]

" Keith Crain, chairman of Crain Communications Inc. and editorial director of AutoWeek, spoke before the Detroit Economic Club on Thursday, Dec. 11, on the state of the Detroit automakers. "

" To say his remarks were candid would be an understatement.........."

http://www.autoweek.com/article/20081211/FREE/812119957

[Jamo]

Originally Posted by 1ntCobra

Hmm, Senate Republicans have opened up the situation so that the White House puts out billions of dollars with conditions to be determined later by the incoming Congress?

I know...

[TerrysSPF]

The only thing the incoming Congress, as well as the incoming President, will want to do is bail out their Union buddies.
I can't wait to see who Obama will appoint as "Car Czar".

-Hey, that would have been a good job for him to have given his buddy from Ill. Gov. Rod Blagojevich, in exchange for the Gov. appointing the person Obama wanted to fill his Senate seat! 'Ol Blagojevich doesn't know much about cars, but he does drive a Suburban!