Zee4Money

Ford a Likely Survivor of the Auto Industry Crisis

If the stock is to risky then buy the debt. Bonds can be purchased with yields of 15-20% and maturities within a year. I agree that the stock is to risky until the bond yields return to a more normal level.

Full disclosure: I am long Ford notes due 1 Feb 2011


On Feb 17 11:45 AM TB3 wrote:

> I agree that Ford is the strongest of the three (faint praise unfortunately)
> and that Mr Mulally is by far the best of the CEO's. However, as
> an investment, I wouldn't be putting my money in a company as laden
> with debt as Ford, at least not yet. Remember that debts need to
> be repaid, and with Ford's excessive overhead and very weak sales
> revenues, they are still burning through cash. Until I see a positive
> cash flow, equal to and better than their short term debt payments,
> I think I'll wait awhile.

GM and Chrysler: Is Avoiding Bankruptcy Avoiding the Inevitable?

I agree - They must keep GM alive for the country to establish a foothold in the small vehicle market. This is critical to reducing dependence on oil. Also, Ford has an impressive line up of new small cars. The company that should go is Chrysler. Ceberus is not willing to bail them out and from what I can see they have not invested in a small car line up.


On Feb 17 08:12 AM nyc female lawyer- bondholder wrote:

> I am happy about the progress with the bondholders. Shame on you
> for recommending bankrupcies. The large law firms take tremendous
> fees and the stockholders suffer in bankrupcies.Also,the GM workers
> would lose their jobs and the National unemployment will rise to
> 15%or 20 % due to a GM bankrupcy
>
> I pray for GM to get more TARP money and stay solvent. I looked at
> the gcars for 2009 and they had great hybrids and are working on
> an electric car. Instead of writing this kind of article I suggest
> you buy a GM car this year.

Auto Bailouts, Mortgage Debt and the Economy

Excellent comments - Where was this information in the recent hearings? I cannot imagine how Wagner was able to sit in hearing room and listen to misinformed Senators scream at him about corporate jets while he does not dare point out the gov'ts role in killing American auto manufacturing. - I really hope one misinformed Senator from Alabama is not allowed to kill three American companies. If he does in Americans that want to buy a Chevy will do so with a made in China label.

On Dec 11 09:09 AM Mike_I_N_Mich wrote:

>
> The following U.S. government policies, many of them having popular
> support, hurt the big three significantly relative to the foreign
> transplants:
> 1. Uneven union laws across states:
> a. The 1935 U.S. government Wagner Act granted the right of workers
> in the private sector to organize labor unions and take place in
> strikes. What this effectively meant was the labor unions were allowed
> to seize the plant and prevent its use until they got what they wanted.
> This created the ridiculous result in the US that workers are paid
> in proportion to the pain they can inflict by shutting things down.
> Trains, docks, garbage collectors, police, … get high pay. People
> in low capital or less critical to safety related industries like
> restaurants and retail get paid low paid. The relationship of pay
> to skill, work ethic, hazards goes away. Soon after the Wagner act
> the UAW took over the auto industry; GM and Chrysler in 1937; Ford
> in 1941. With no foreign competition the UAW monopoly flourished
> for about 30 years.
> b. The 1947 U.S. government Taft–Hartley Act tried to reign in the
> unions after a series of post-war strikes. While some provisions
> were national, the states were allowed to pass "right-to-work laws"
> that outlawed union shops. Such shops require workers to join the
> union and pay dues. Said state laws are serious impediments to union
> organization and viability because few people want to pay dues if
> not required.
> c. The vast majority of foreign owned plants are in right-to-work
> states providing huge advantages in labor costs and productivity
> relative to the big three.
> d. The big three would find it impossible to change the state laws
> where they are located due to union dominance of state governments.
> If they built in the South they have to accept the UAW because they
> would strike back in Michigan.
> e. No other country has this crazy system to my knowledge.
>
> 2. Promoted defined benefit packages and kept them in the company
> name. Did you ever consider how totally stupid it is to pin an employee
> retirement package, meant to last about 50-60 years from first hire
> until death, to the viability of their company? The top 10 companies
> in 1950 were very different than in 2000, with the railroads taking
> a big dive since then. And in 2020 it will be totally different again.
> Defined benefit packages were a bad idea, promoted by the US government
> till this day, and the big three are paying the price. If a company
> is in decline, due to the other items mentioned here, their retiree
> pool grows relative to gross income and number of active workers.
> Costs rise and competitiveness goes down, sales decline in a vicious
> spiral. Note also that while someday the transplants will pay pensions
> here in the US, the bulk of their corporate salary people (engineers
> for instance) back home get pensions from the government. Again,
> a totally crazy concept promoted by the Feds with widespread public
> support. And again, affecting the big three orders of magnitude harder
> than the foreign auto companies.
>
> In most western nations, if there is a defined benefit program, it
> is paid into a government fund and is divorced from the company.
> If the company fails, people don’t lose their pension. In the U.S.,
> the Pension Benefit Guarantee Company, a quasi-government / private
> company (like Fanny-Mae) supposedly fills in when the company goes
> belly up. But it is really a welfare program, with maximum limits
> far lower than promised pensions for many salaried workers. The airline
> pilots at United Air Lines, the current poster child of how wonderful
> chapter 11 will be for the big three, got screwed out of a large
> percentage of their “guaranteed” pension. Apparently the courts have
> ruled bond holders have first dibs on people’s defined benefits supposedly
> “held in trust”. What a travesty; only in the worse run country in
> the western world. These plans were in lieu of 401k plans. They are
> not deferred compensation as some say. There is a pot of gold with
> the employees names on it.
>
> See the PBS Frontline episode here for what happened at United.
>
>
> www.pbs.org/wgbh/pages.../
>
> All of you with defined benefit plans are in jeopardy. The Feds can
> fix these laws by simply making pension funding shortfalls first
> in line for bankruptcy allocations. Put the vulture chapter 11 lawyers
> and banks second in line after peoples pensions (which are essentially
> saving accounts).
>
> 3. No national healthcare. This is killing all US industry because
> we are competing with foreign companies with virtually no health
> care costs at home. Again, for transplants, the tens of thousands
> of such people at corporate headquarters are not in the U.S., but
> back home with free insurance. I’m basically a free market person
> but U.S. healthcare is so screwed up, and the employer based care
> creating such a competitive disadvantage, I give up – company paid
> healthcare must go and something needs to replace it. Watch for a
> future blog entry on that topic. Even though the transplants provide
> health care for their workers this is again an order of magnitude
> bigger problem for the big three because: 1) Corporate staff is back
> home with free health care, transplant workers are younger and therefore
> healthier, big three also pays health insurance for a million retirees.
>
>
> 4. Blunt instrument CAFÉ laws. The original purpose of CAFE was to
> reduce depletion of finite fossil fuel supplies and/or to reduce
> foreign imports. The Global Warming theory did not exist when CAFE
> was instituted but CAFÉ supports this as well. These same goals are
> achieved in almost all other Western counties via very high (on order
> of $3-$6 per gallon) federal gasoline taxes. That is the primary
> reason the cars are smaller in Europe and Japan. Our cowardly government
> did not want to be associated with taxes so instead wrote CAFE laws
> so the big three could do the taxing. I would argue that such laws
> fell, and continue to fall, disproportionately on the big three.
> The laws regulate an average fuel economy for a fleet produced by
> a given company. This forced the big three to abandon the cars they
> made money on, and build cars they don’t make money on, usually at
> a loss. The economics are simple: it takes as many overpaid UAW workers
> to put a door on a $14000 focus as a $30000 F150. So the bigger and
> more expensive the car the better the big three can compete. The
> above mentioned economic disadvantages of the big three are exaggerated
> on small, lower cost cars. And yes, people expect small cars to cost
> less. Screwed again by the feds! Ford, for instance, has trucks providing
> over 50% of sales. A rapidly increasing percentage of these trucks
> are used in the trades; try carrying a load of bricks or even a saddle
> in a Focus. Why does the Ford commercial truck have to go into a
> CAFÉ formula when a Mack Truck or Caterpillar dump truck does not?
> In the rest of the world, where gas taxes are used to reduce fossil
> fuel consumption, each company is allowed to compete in the part
> of the vehicle market where they do best. The customer takes the
> cost of gasoline with tax into consideration when he decides what
> size and features he needs, and then shops the brands that play in
> that market. With CAFÉ, the big three were forced at gunpoint to
> build and sell small cars at a loss just so they could meet the consumer
> demand for larger cars and trucks with their greater utility (carried
> more people for instance). The Japanese entered the market in the
> small car nitch where their low cost and experience from the sane
> countries with gas taxes gave them the greatest advantage. The Japanese
> became associated with small cars and better gas mileage, although
> for the same size car and performance there was no difference on
> average.
> It it were one or two of these items the big three might have competed
> better, but between the four the cost disadvantage in thousands per
> car and the hill too hard to climb. People seem to think Americans
> are superman, blessed with privilege, and the big three should have
> been able to overcome these odds against our oriental upstarts. In
> my opinion the big three did an amazing job lasting this long, as
> they are only mere mortals; doing the best they can given the stacked
> deck against them.
> In the end it is not the above items that are killing the big three
> right now. These items and the recent gas spike put the big three
> in a weak position, but they were recovering with the help of the
> UAW. Cars sell on credit, and there is no money available. Houses
> are also credit sensitive, but the housing industry doesn’t have
> the large capital equipment (factories, labs, buildings) and huge
> staffs (engineers…) to keep feeding when there is a drop in sales.
> And the housing industry is dominated by illegal alien workers which
> they just let go.
> This credit crisis in not of the big three’s making by any stretch
> of the imagination. The most likely biggest wrongdoers in the congress
> and the federal bureaucracy, will keep their jobs and pensions. The
> second biggest wrongdoers in the financial sector, are getting a
> trillion or so dollars of bailouts.
> The big three are asking for a 5% loan and all this hate comes out
> in the press and the web. The gap between perception and reality
> is staggering.