Thursday, April 9, 2009

Reward good behavior in American business place and let the bad suffer needed consequences: here's why GM should go into bankruptcy



Why is Ford Motor Co. not asking for your tax dollars to bail out the poor decisions of its executives and union leaders?

Because Ford's top executive made the right kind of decisions before the Great Recession to put its business operations in line with efficiency and consumer demands. And the Ford example should be rewarded, and the GM and Chrysler examples should be allowed to push those automakers into bankruptcy. Or as with newspapers, out of business.

Many businesses and companies in this nation made the right decisions before the recession and continue to do so now. They, however, in economic policy from Washington are being largely ignored.

There needs to be visible support for them, and some punishment and no bailout for those companies and industries that sat on their hands or acted fraudulently. The Obama administration and Congress have yet to establish this defining and needed principle that reflects the side of capitalism that works, and works well.

What we need is the survival of the fittest. Because it actually is the survival of those who did not take their customers and market share for granted.

Ford to me still symbolizes quality, getting my money's worth. I still drive my 1994 Taurus. My favorite supermarket is Publix, employee-owned. Quality also is the rule. And the pricing is fair and bargains frequent.

That takes a lot of work. From Washington, it should also come with more visible support.


The New York Times reports in this excerpt:

On Nov. 29, 2006, Ford Motor made a surprising pitch to the nation’s biggest banks. In a packed ballroom at a New York hotel, Ford’s chief executive, Alan R. Mulally, said he would mortgage all the company’s assets for billions of dollars in loans to finance an overhaul of the troubled automaker. Although the economy was healthy then, Mr. Mulally said the money would give Ford “a cushion to protect for a recession or other unexpected event.”

At the time, the request was considered an act of desperation. But the $23.6 billion in loans it received turned out to be Ford’s salvation.

Plunging car sales have driven its two American rivals, General Motors and Chrysler, to the brink of bankruptcy, forcing them to borrow $17.4 billion from the federal government to stay in business. The future of both companies will be decided in the weeks to come by President Obama and his special auto task force.

But because of the money it borrowed nearly three years ago, Ford is in far better shape than its two crosstown rivals. The loans have kept it independent and on a course to survive the worst new-vehicle market in nearly 30 years.

“It was a defining moment for us,” Mr. Mulally said in an interview. “But they never would have been willing to lend us the money if we weren’t on a different path.”

Mr. Mulally had been on the job as Ford’s chief executive less than 90 days when he asked for the loans. But as he told the bankers, he was prepared to make tough decisions, including selling off brands, shedding jobs and focusing Ford’s efforts on small cars rather than trucks and sport utility vehicles.

Since then, he has accelerated Ford along that path, pursuing a top-to-bottom transformation that extends from its global product lineup to its renewed focus on the Blue Oval trademark.

The Obama administration is forcing GM and Chrysler to obtain big concessions from union workers and lenders to qualify for more federal aid.

Ford, however, is having better success on both fronts without a government mandate.

Unlike GM and Chrysler, the company has reached agreement with the United Automobile Workers to finance half of its new retiree health care trust with company stock.

Earlier this week, Ford also completed a deal with its creditors to retire $9.9 billion in corporate debt—some of which was part of the big borrowing in 2006.

Investors have welcomed the moves. Ford’s stock climbed 13 percent to close at $3.95 on Wednesday, the highest it has been since October.

That was when the car market crashed and the auto companies began burning through huge amounts of cash. A month later, Mr. Mulally was in the spotlight—along with GM’s chairman, Rick Wagoner, and Chrysler’s chairman, Robert L. Nardelli—during Congressional hearings on Detroit’s financial woes.

Mr. Mulally said Ford never intended to ask for federal help but needed to support the industry during its crisis.

“From Day 1, we had no desire to access the government money,” he said.

Ford parted ways with GM and Chrysler in December, when its two rivals effectively came under government supervision as part of their loan agreements.

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