Of the three American auto manufacturers, Ford is the only one to have eschewed Federal bailout money, instead, preferring to embrace a solution in keeping with traditional capitalist business practices; relying on stockholders and bondholders rather than the American taxpayer.
At the same time, GM and Chrysler have sold their souls and prostrated themselves before the Federal Government and the Bush/Obama administrations in an effort to to secure their future at an immense cost to the American taxpayer which some say may reach as high as $130 Billion, but no one really knows what the final tally will be.
Today from the Financial Times, we find that, under the government restructuring plan for GM "the US government would cancel most or all of its existing debt in the company and invest in a “new” GM that could emerge from bankruptcy in the autumn, said a person close to the matter."
Additionally, from the same piece, "GM on Friday said it had borrowed another $4bn from the Treasury, taking its total federal funding to $19.4bn, and expected to need $7.6bn more after June 1."
So, what of Chrysler? Via Reuters:
"Chrysler has a government deadline of June 15 to close the transaction to sell itself to a "New Chrysler" owned by the U.S. and Canadian governments, Chrysler's union and Fiat, according to court papers. Chrysler's unsecured creditors' committee said in court papers on Friday that if the sale was not able to go forward it would mean certain liquidation for the iconic U.S. automaker."
But it would appear that Fiat sees that the corpse, of which they are buying a part, is quickly deteriorating from rigor mortis to outright decay; "Fiat, however, said that any delay to the sale process "could ultimately prove fatal" to Fiat's plan to revive Chrysler. It said it already has concerns about the value of the assets "New Chrysler" is expected to acquire from "Old Chrysler" as the company's plant shutdown is affecting its suppliers and dealer networks."
Chrysler, who, from what I could find, has received "only" $7 Billion in Federal bailout money, so what becomes of that money if, and when Chrysler is owned by its Union, Canada and Fiat? "Under the new scenario, the U.S. Treasury would recover 3 to 5 percent of its investment, compared with 3 to 6 percent in Capstone's previous analysis." Capstone Advisory Group is Chrysler's financial advisory firm.
So let's get back to Ford. All three of these companies competed in the same market, played by the same rules and were represented by the same union. At least at the moment, Ford is surviving, while GM and Chrysler are essentially corpses; either being propped up by billions of taxpayer dollars or their parts being sold to foreign competitors.
How is this fair to Ford? GM is being assisted in terms of tens of billions of dollars of taxpayer money, and has plans on forgiving that debt in the hope that they can emerge from bankruptcy later this year. Were this a traditional bankruptcy, investors would have agreed to take a share of losses, but when the investor is the Federal government, forgiving debt owed to the American people, this presents a whole new pernicious and disturbing aura of government control in the private sector. Certainly, the government will expect "some influence" within these quasi-state-owned auto companies, will it not? President Obama has already virtually fired the CEO at GM.
As for Chrysler, it seems likely that liquidation or being "sold off for parts" may well be its fate. Currently, the UAW is becoming the majority stockholder in Chrysler, arguably one of the very same groups that got them into this situation in the first place. (I seem to remember something about workers controlling the "means of production").
None of this bodes well for the American automobile industry, or the state of capitalism in the United States as a whole. Ford may well prosper in the long run, given the government's utter incompetence in dealing with anything it touches, aside from those tasks it is constitutionally mandated to perform. I have serious doubts that a quasi-state-run automobile company will be anything but a taxpayer money pit, producing cars nobody wants at prices nobody wants to pay.
In the interim, Ford plays by one set of rules while GM and Chrysler play by another. Are Ford"s debts being forgiven as are GM's? Are Ford's creditors willing to settle for 3 to 5 percent of their investment as is Chrysler's government investor?
Ford stood strong and did not invite the government onto its house knowing, I believe, that there would be a price to be paid; the greatest of which being their autonomy. For that, I applaud them and, should I be in the market for a car, I will buy a Ford. I will shun GM and Chrysler like the plague they have become.
All of this should be a cautionary tale about the fragility of the capitalist system, the balance between it and the government, and the envious eyes that that some in the government cast upon corporations in times such as these, under the guise of "help". A "free market economy" is just that, and corporations should be wary of the tentacles involved in "government bailouts".
Capitalism is what has made this nation the strongest and richest nation in the history of mankind and we should not abandon it during this time of contraction. To do so is a betrayal of American principles and hastens our journey, in the words of Hayek, down the "Road to Serfdom".