Ford

In an Op-Ed piece in today’s Washington Times columnist Mark Steyn compares the condition of GM with that of the U.S. In a play on the notorious quote that what’s good for GM is good for America, Steyn opines “Like GM, the U.S. government spends more than it makes and has airily committed itself to ever more unsustainable levels of benefits. GM has about 95,000 workers but provides health benefits to a million people. It's not a business enterprise, but a vast welfare plan with a tiny loss-making commercial sector. As GM goes, so goes America?”

As concerned as we all should be about what GM’s bankruptcy means for the country and for us as individuals (in my case not much, I have never owned a GM product and don’t plan to) we should take a step back and consider another U.S. automaker, Ford.

As GM, and to a lesser extent Chrysler, has spiraled into a financial and operational disaster, Ford has, well, been Ford tough. Here are some interesting facts:

• Ford sold more cars in May than any other automaker, here’s the breakdown of the top 20 cars sold in the U.S. in May:
  1. Ford F-Series Pickup
  2. Chevy Silverado-C/K Pickup
  3. Toyota Camry
  4. Honda Accord
  5. Toyota Corolla
  6. Honda Civic
  7. Nissan Altima
  8. Dodge Ram Pickup
  9. Ford Fusion
  10. Honda CR-V
  11. Chevrolet Malibu
  12. Chevrolet Impala
  13. Ford Escape
  14. Ford Focus
  15. Toyota RAV4
  16. Hyundai Sonata
  17. Hyundai Elantra
  18. Chevrolet Cobalt
  19. Jeep Wrangler
  20. Toyota Prius

• Ford’s Fusion Hybrid outsold the Toyota Prius and is the first “green” car to crack the top 10 in sales.

• Ford increased its market share in May to 17.4%, its largest share since 2006.
  

What is Ford doing that GM isn’t?

First, Ford is making cars that people want to buy and are willing to pay for without massive discounts or 0% financing. True, Ford makes those incentives available but not to the margin killing extent of its rivals.

Second, Ford did something about three years ago that no other car company was willing to do: It hedged. In 2006 Ford was deeply in debt and had lost money in two out the past three years. Then CEO Bill Ford stepped aside and hired Boeing CEO Alan Mulally to lead the company. No newcomer to cyclical business, Mulally quickly moved to sure up Ford’s balance sheet by borrowing $23 billion through pledging all the company’s assets as collateral. At the same time, Ford restructured to cut costs and manufacturing capacity and began moving the company’s infrastructure away from the SUV focused nineties model so that it could focus on three objectives:

More hybrids

Imaginative small cars

Realistic pricing

Somehow Mulally, Bill Ford, and others at the company knew they were in for tough times and prepared. They may not have known that global credit markets would freeze up or that consumer spending would fall off a cliff but they put themselves in a better position to deal with those events when they arrived.

I would prefer we use Ford as the example when comparing the condition of an automaker to that of the U.S. GM was unwilling to make the tough decisions and sacrifices in the short term to improve the odds of long term success. The result was bankruptcy, nationalization, and loss of control. Ford sucked it up, ditched the idea of a government bailout, and is now taking market share from competitors and positioning itself to come out of the recession as the top U.S. automaker.

What’s good for Ford is good for America.

Later