Chrysler Bankruptcy Would Hurt Ford, Too

Ford says it can continue to forgo government loans, and that it is still on track to reach its goal of “breakeven or better” in North America by 2011.

But if Chrysler is forced to declare bankruptcy – which looks increasingly likely – that would have a knock-on effect on Ford’s progress toward its goals.

In testimony before the Senate Banking Committee in December 2008, Ford President and CEO Alan Mulally said there is 80 percent overlap among suppliers for Ford, General Motors and Chrysler. That means if a Chrysler bankruptcy forces some of Chrysler’s suppliers to go bankrupt, many of those suppliers would be Ford’s suppliers, too.

In addition, about 25 percent of Ford’s biggest dealers also own GM and Chrysler franchises, Mulally said in December.

“Our industry is an interdependent one,” the Ford CEO said then. “That is why the collapse of one or both of our domestic competitors would also threaten Ford.”

Ford has enough troubles, even without a collapse for either Chrysler or GM. Ford today reported a net loss of $1.4 billion worldwide in the first quarter, versus a slim profit of $70 million in the year-ago quarter.

In North America, Ford’s pre-tax loss widened to $637 million from a pre-tax loss of $45 million. Ford’s loss in North America reflects the fact that wholesale deliveries fell by nearly half, to only 354,000 units. Automotive revenues in North America fell by about 40 percent, to $10.2 billion.

Mulally said today in a written statement Ford has been able to slow its cash burn rate. Ford has also reduced its outstanding debt, cut costs and reached new agreements with the UAW.

“Our results in the first quarter reflected the extremely difficult business environment and weak demand for autos around the world,” Mulally said.