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Updated Friday, December 12, 2008 10:51 am TWN, By Kimberly S. Johnson, AP

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Ford’s gamble to leverage assets for debt pays off

Should industrywide U.S. auto sales drop to new lows in 2009, Ford says it would need to come to the government for help. In the plan it submitted to Congress last week, it asked for access to a US$9 billion line of credit just in case.

Ford never thought the credit it lined up would be needed to run basic operations, at least until car sales plummeted this year.

“None of us thought it would go as deep as it was going to go and we would have to use it all,” Mulally said. And if GM, Chrysler or both declare bankruptcy, it could drag down parts suppliers and force Ford into the same situation, Mulally said. Any long-term gains in market share would be overshadowed by short-term pain in a disrupted supply chain, and negative customer perception.

“I can’t predict the future, and this thing might degrade further, even Ford with its dynamite plan might have to need a small bridge loan,” Mulally said. “We don’t need it now.”

In that sense, Ford appeared to take a back seat at Congressional hearings in November, and it reiterated the changes it is already making when Mulally returned to Washington last week.

“When I heard Mulally’s presentation, it sounded like an advertisement for Ford, rather than a plea for help,” said Bruce Belzowski, associate director of the Automotive Analysis Division at the University of Michigan’s Transportation Research Institute. “It’s more a laid back strategy but a serious one. They’re very supportive of getting government to help the companies.”

Mulally said his pilgrimages to Congress had little to do with Ford’s position, but more of a gesture to “stand tall” with the U.S. auto industry.

“I have a plan, it’s a solid plan. I have the money, but I’m there standing with the industry,” he said. “My competitors said they’re in dire financial straits. Having a bridge loan and keeping it going is right for the economy and right for the United States.” Mulally said Ford has completed much of the restructuring that Congress is demanding of the other two, and it anticipates no further cuts will be necessary as long as the U.S. auto market doesn’t worsen considerably.

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