Ford doing better than GM and Chrysler, but still not very well
So far, Ford is avoiding bankruptcy or a government bailout. Consumer confidence will be most important in securing its financial situation.
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That’s not to say that Ford is on easy street. Its slumping sales and losses of $1.4 billion in the first quarter, announced Friday, prove that point. But in the face of a historic downturn for the industry, Ford is so far restructuring and surviving on its own two feet, and out of court.
That’s good news for the company on several fronts: It avoids bureaucratic interference from Washington and the uncertainty of legal proceedings. Also, the rising rumors about bankruptcy at General Motors and Chrysler in the past few months are enough to make some consumers wary of a purchase from those two firms – and hence more likely to turn to their healthier rival. An actual bankruptcy for those firms would tilt even more customers Ford’s way, industry analysts say.
Ford could pattern the others' cost-cutting
In addition, Ford may be able to benefit by using GM and Chrysler as a pattern for its own efforts to cut costs. If a bankruptcy court approves steep pay cuts on union workers for those firms, Ford can argue that the survival of its own union jobs depends on moving toward a similar pay scale.
“They’re hoping to ride the coattails” of any bankruptcy-induced changes, says Rebecca Lindland, an auto analyst at IHS Global Insight in Lexington, Mass. And “the longer Ford goes without taking government money, the better the consumer perception is of Ford.”
A bankruptcy for other big carmakers wouldn’t be an unalloyed boon for Ford, however.
One immediate uncertainty would involve the auto supply chain. All the companies have an overlapping base of suppliers, and those companies are already on hard times because of the industrywide sales slump. The risk of suppliers going bust could rise further if bankruptcy proceedings result in unpaid bills or a further slowdown in auto production.
The industry is bearing the brunt of America’s consumer recession.
Overall, sales of light cars and trucks are down 38 percent so far this year, compared with the early months of 2008. The Detroit Three have been hit even harder than that, number suggests, as their foreign rivals have gained market share.
Everything depends on consumer confidence
Ford may already be benefiting somewhat from consumer fears about bankruptcy. Its sales are down 43 percent so far this year, less than Chrysler (46 percent) or GM (49 percent). But as those numbers suggest, doing relatively better does not mean doing well.