The business plan Ford will submit at Congressional hearings this week is figuratively wrapped in a green environmental flag, with an emphasis on future battery-powered models and more fuel-efficient gasoline engines.
Ford’s task, and the task for rivals GM and Chrysler, is to get the agenda in Washington off the industry’s lengthy track record of failed restructuring and downsizing.
Instead, Ford focuses on a future state where it is smaller, smarter and greener. Ford also says that based on its latest business plan, its North American automotive operations will at least break even on a pre-tax basis in 2011.
That’s another key to winning federal loans, since Congressional leaders told the Detroit automakers following their unsuccessful visit to Washington last month to return with “viable” business plans.
Unlike GM and Chrysler, however, Ford stops short of saying that an immediate “bridge loan” is an absolute necessity. In fact, Ford says it will ask Congress for a “standby” letter of credit for up to $9 billion, to be used only if business conditions get worse and Ford needs it.
“For Ford, government loans would serve as a critical backstop or safeguard against worsening conditions, as we drive transformational change in our company,” said Ford president and CEO Alan Mulally in a written statement. Mulally will testify in the hearings this week.
Most forecasters, including Ford’s, expect business to get worse before it gets better, so it’s not unlikely Ford will have to ask for the money later, without asking for it right now. If Congress takes Mulally literally — that Ford doesn’t really need a bailout — that’s a big hole in any potential united front for the Detroit Big Three. It’s also potentially a stick Congress could use to beat up GM and Chrysler: “If Ford doesn’t need a bailout, why do you?”
Separately, GM executives said that bankruptcy for any one of the Big Three represents a domino effect on auto industry suppliers, on dealers, and on consumer confidence, which inevitably spells bankruptcy for all.
“We’re all in the same boat,” said Mike DiGiovanni, executive director of global sales analysis for GM. “It’s unfair to highlight only us, we are all joined at the hip,” he said, in a Dec. 2 conference call to announce November sales.
Ford posted its 32-page business plan, plus a four-slide, Powerpoint appendix, on its media web site on Dec. 2, ahead of hearings in Congress on Dec. 4 and 5. One slide shows how Ford is shifting its product mix and its spending on new products, away from trucks and toward cars and crossover vehicles.
Mulally also announced that if Ford uses funds from a potential government bridge loan, he will work for a salary of $1 a year. Ford also said it is canceling all bonuses to be paid in 2009 for all management employees worldwide, and for all employees in North America.
