Ford Motor Co. is boosting production for the second time this quarter — an action in sharp contrast to the factory shutdowns taking place at its bankrupt cross-town rivals.
But General Motors Corp.’s bankruptcy filing, which will eliminate much of that company’s debt, also creates new challenges for the Dearborn automaker, particularly with the financing of its vehicles.
Ford, which will announce today that it is increasing its North American plant output by another 10,000 vehicles, is gaining market share as customers shy away from GM and Chrysler LLC, and it stands to gain more as GM moves to eliminate or sell its Pontiac, Hummer, Saturn and Saab brands. Chapter 11, however, allows those companies to eliminate much of their crippling debt, close dealerships in overcrowded urban markets and secure more favorable terms from the United Auto Workers.
Ford has addressed some of its issues outside of bankruptcy court. In March, the automaker renegotiated the terms of its UAW contract and convinced bondholders to forgive billions of dollars of debt for pennies on the dollar. But bankruptcy will allow GM and Chrysler to do more.
Asked if Ford was being left at a disadvantage, an administration official said no.
“Ford has ample financial resources,” he said. “Ford has been very successful in growing its market share during this period.”
But a senior Ford executive, who spoke to The Detroit News on the condition of anonymity, said the company is being hurt by the government’s restructuring of GMAC LLC as a bank holding company. That allowed GMAC, which is now the lending arm of GM and Chrysler, to receive taxpayer money — money it is already using to give customers no-interest loans.
“They’ve just got an unlimited spigot,” the source said. “The scary part is all will be forgiven and they will have cleared their books better than us.”
The Treasury Department has been slow to act on Ford’s application to allow Ford Credit to become an industrial bank. That still would not give Ford access to federal money, but it would allow Ford Credit to secure financing at more favorable rates.
Ford is confident it can get terms similar to GM’s from the UAW, and it will sell more stock to pay off its remaining debt. Though its sales are down sharply with the rest of the industry, the family-run company is eager to avoid any move that would subject it to government control.
Analysts agree Ford is in a relatively strong position.
“GM will still emerge with leverage. They’re still going to have some debt and in terms of employee obligations. But they also still have years of restructuring to realign their manufacturing and product offerings,” said Mark Oline, managing director of Fitch Ratings. “Ford is much farther along in that process, and so is much closer in our view to being competitive and being able to generate positive cash flow.”