Detroit–As noted earlier, Ford Motor Company today announced a staggering $14.6 billion loss for 2008 with a fourth quarter loss of $3.3 billion ($1.37 a share) that was worse than Wall Street expectations of $1.19 per share. Nevertheless, Ford insists that–unlike its Detroit siblings, GM and Chrysler–it does not need government welfare . . . yet.
But Ford’s numbers once again shine a bright light on how unrealistic Detroit’s business models have been and how unrealistic Washington politics encourage the companies to seek federal aid.
Thanks to its aggressive CEO, Alan Mulally, the Blue Oval has been much more pro-active than GM in the past year in shedding unprofitable brands (only Volvo and Mercury now remain as non-core brands and Volvo is on the auction block as we speak) as well as mortgaging all the company’s assets to gain needed cash flow.
Still, Ford (along with GM) only announced this week–this week!–that it was ending the company’s jobs bank, a program unprecedented in any other manufacturing sector wherein UAW workers were given 85 percent of pay after being laid off. Yet, even without the jobs bank, fired blue-collars will still get 72 percent of their pay from a combination of company and government programs. No wonder the Number One property of foreign automakers is to locate in right-to-work states.
Furthermore, Ford is investing millions in electric and hybrid vehicles in order meet government CAFE standards and wow green Washington cocktail parties. The new, 41 mpg Ford Fusion, for example, was the darling of pols at the Detroit Auto Show, yet every car will be sold at a loss.
Is this a sensible product for an entity shedding billions of dollars?
Meanwhile, Ford continues to lose market share to foreign upstarts like Hyundai, Kia, and Subaru (all of whom had record years in the U.S. market) who undercut domestics with quality, affordable sedans while paying much lower labor costs and investing in fuel-efficient, meat-and-potatoes gas engines instead of exotic hybrid ventures.
Mulally puts on a brave face in resisting the trap of government funds. But he faces a Democratic president and Congress that are unrelenting in their support for unions and expensive green mandates–support that makes it ever more difficult for Detroit to stay off the dole.
— Henry Payne is an editorial writer and cartoonist with the Detroit News.