Posted by: David Welch on January 15, 2009
To hear Ford tell the story, the Dearborn (Mich.) company is the smart one that is getting its house in order and doesn’t need government loans like more troubled rivals General Motors and Chrysler. That’s mostly true. Ford borrowed enough in the open market before the credit markets froze up. But to say that Ford isn’t seeking a big chunk of Federal funds is a bit misleading.
Right now, Ford has says its future product programs qualify the company for up to $11 billion of the DOE’s $25 billion program. The company figures it may only get about $5 billion, though. GM wants $8 billion from the DOE loan program, which extends credit for projects resulting in better fuel economy. It can be advanced vehicles like the Chevrolet Volt electric car or to tool up plants for more prosaic fuel sippers like the Chevy Cruze compact. Others are seeking funds, too. Even tiny Tesla Motors wants $450 million from the DOE.
Adding in the $13.4 billion or more that GM needs from the Treasury Department to stay afloat and its borrowings are much more. The company will eventually be heavily indebted to the federal government. But Ford clearly needs a boost, too. And it’s no wonder. Not only are the new fuel economy regulations forcing automakers to retool many of their models, Ford has plenty of cash problems. In the third quarter, Ford burned $7.7 billion in cash while GM burned $6.9 billion. For the first three quarters of last year, Ford burned through $15.7 billion while GM went though $14.1 billion.
Developing new models and technology is a massive expense for carmakers. If the DOE agrees that many of Ford’s future models qualify for the program, it could end up borrowing more from the DOE than GM under the program. Bottom line: Ford’s problems are less urgent than GM’s issues. But let’s curb our enthusiasm a bit.