Here’s the logic behind Ford’s official plea to Congress: We might be able to weather the storm sans-bailout, but if one of our competitors goes bankrupt, then we might get dragged down too. And since you ought to rescue GM (GM) and Chrysler, then you really have to rescue us too. So we’d like $9 billion, please.
- It wants $9 billion in the form of a temporary bridge loan. Though if it doesn’t get the money, the company believes it will still make it through 2009 without going bankrupt. (Also note that bridge loans typically carry high interest rates, but we’re pretty sure that that’s not Ford’s idea here)
- With the money, it will make more green cars. By 2014, 90% of Ford, Lincoln and Mercury light-dutymodels will qualify as “Advanced Technology Vehicles”
- By 2015, average fuel efficiency gains will come to 35%, it says.
- Meanwhile, Mulally will work for $1 in 2009 “a sign of his confidence in the company’s transformation plan and future.” (Note that Mulally has banked $50 million since he took the job, so if he didn’t blow it all already, he should be OK).
- The company is cancelling bonuses company-wide.
There are a few other details, but that’s the core. Now the assumptions:
- Sales for 2009, 2010 and 2011 will hit 12.5 million units, 14.5 million units and 15.5 million units, respectively. So 2009 is the nadir.
- Excluding charges, Ford will return to profitabiliy in 2011.
- In the meantime, Ford is looking to dump Volvo.
Without attempting to vouch for the accuracy of the details, we think this is probably the best that Ford could’ve been expected to come up with. They’ve offered some very politically-friendly ideas — no bonuses, no CEO pay and greener cars — and they’ve done so in a manner that sounds realistic, in terms of Ford concievably becoming a viable car company once again.
Ford shares are up over 12%, and we think Ford has probably given itself the best shot possible at accessing the government cash. Now if GM and Chrysler can put together something similar, then the odds that Detroit will get some kind of bailout — with a heavy handed overseer — will improve.