The saga of Detroit is continuously sad, frustrating, and unfortunately ironic. While Ford has moved forward without government assistance (save the CAFE fuel standards stipends available to all car companies), GM and Chrysler have had to bow their knees at 1600 Pennsylvania Ave. But, like homeowners who put a lot down on their house and paid their mortgage only see their irresponsible neighbor’s mortgages get restructured for free, Ford might suffer from its independence and insistence on not stealing from the taxpayers. Paul Ingrassia at WSJ writes today:
“Ford has about $26 billion in automotive debt- – about the same as GM’s $27 billion. Ford’s debt is secured by its assets. And secured lenders must be repaid — unless they happen to be Chrysler lenders and get clipped by a company bankruptcy plan that’s backed by President Obama…
Ford executives are probably fretting about this, but there isn’t much that can be done. They already have exchanged some of their debt for equity, and might do more of that. But the bottom line is that we live in a world where wisdom can be punished and where foolishness can be rewarded.”
The story is unfortunately ironic in that, while GM has spent the past few years developing the Chevy Volt to probable disaster, and Chrysler has barely managed to keep its head above water, Ford had revamped its model line and prepared for the evolving market:
“The 2010 Taurus, which debuts next month, is a brand new start with sharp styling and the same $25,995 base price as the old, lackluster model. For more money you can add high-tech gadgetry such as forward-looking radar, adaptive cruise control, and a collision-warning system that applies the brakes when you get too close to the car in front of you…
Ford’s new Fusion Hybrid, meanwhile, gets 41 miles to the gallon in the city, versus 33 mpg for the Toyota Camry hybrid (with a similar price tag). The difference comes from lots of little things. Ford narrowed the slots on the wheel covers and changed the design of the fog lights, for example, to reduce aerodynamic drag.”
Ford was able to accomplish this by mortgaging its assets and raising private capital. However, government aid is going to eventually put Ford’s competitors at an advantage as they don’t have to pay down their debt, but clear it for cheap in bankruptcy and with government loans. Bankruptcy judges and the White House should take careful note how private sector, independent firms like Ford, Honda, Toyota and others are affected by their actions with GM and Chrysler.
More from Reason on the auto bailout issue: