Tuesday, December 02, 2008

Ford Should take Uncle Sam's Money

Ford (F) announced a restructuring plan that was drafted by their PR dept. Sell the corporate jets, cancel bonuses and the big guy will work for a $1.00 per year if they have to access any government financing. They are going to come out swinging with green products and market their way out. OK now take a look at the risk factors that they threw into the safe harbour clause of the press release. First of all its it takes up about 50% of the line space. Secondly they have thrown in every possible risk that you could imagine. Maybe commodity prices will be disrupted, maybe interest rates will go against us, maybe labour will cause trouble. Maybe they do not really have this thing nailed down and need to blame every pebble on the road if it does not work out.

They do claim to be aggressively cutting costs. That most likely means UAW will experience pain. UAW will be trying to avoid pain at GM and Chrysler through government funding. Why will they accept it at Ford knowing that government cash could have been used to help them out.

Will government funding for GM and Chrysler allow them to catch up on green products which will penalize Ford investors who may have been getting ahead in R&D.
It sounds good to not take government funding for the time being. But if Uncle Sam is showing up with billions he will inadvertently change the competitive landscape. Ford needs to be on that bus.