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Ford profit a victory for capitalism over statism, if the union doesn't ruin it
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Mustang logo is shown on the back of a car on a Ford dealership
Back when it looked as if the entire automotive sector of the U.S. economy was about to fall into an abyss, it seemed inevitable that the fundamental relationship between the Government, and these former industrial titans, would change forever. The Obama administration swooped to the rescue with an automotive bailout to “save” this key industrial sector. Once the automakers saw what the trade-off would be for accepting bailout funds, GM and Chrysler acquiesced, but Ford balked, and it is looking to be the best decision they have made in a long time.
I will not waste time going into the details of the bailout, suffice it to say existing shareholders, many of whom had invested large sums in the automakers, had their stakes in the car companies eliminated. The Government pushed the automakers to give large ownership percentages to the UAW and “suggested” via the “car czar” what types of cars the automakers should be producing. The Government also forced out GM CEO Rick Wagoner, named Vice President Fritz Henderson as CEO and brought in former AT&T CEO, Edward Whitacre, to be Chairman of the Board. Many conservatives, liberals and civil libertarians were quick to point this was the same Whitacre who rolled over for the Bush Administration regarding wiretapping AT&T customers after 9/11. They argued the Obama administration was putting someone in place that had shown a proclivity to quickly surrender when pressured by the Government. GM even earned the moniker “Government Motors” in many segments of the media.
Ford on the other hand, decided the price of a bailout was too high, rather, they engaged in serious cost cutting measures, including cutting all management salaries by at least 30%. They restructured much of their operations to take advantage of increasing efficiencies and re-focused themselves on their core business. Now, while GM and Chrysler remain little more than zombie companies, hoping to return to profitability, and private hands, in a year or two; Ford just announced a $1 billion profit for the 3rd quarter of 2009.
It appears to me that while GM and Chrysler ran to the Government for cover and protection from the capriciousness of the free market, accepting the prison of government protection, Ford redoubled themselves to the perils, and potential rewards, of competitive capitalism and is well on the way to a dramatic turnaround. Ford got some help along the way by the many Americans philosophically opposed to bailouts and to “Government Motors”. Many well known conservatives and libertarians made vocal and public commitments to purchase a Ford vehicle.
In an interesting twist, Ford is now the only U.S. automaker to not have had large ownership stakes carved out and handed to the United Auto Workers (UAW), the union which represents many assembly line workers. This may explain why the UAW just rejected the contract it had negotiated with Ford. Union members claimed they voted against the contract because it was an unfair deal, even though it was the same contract they approved for GM and Chrysler. For the first time in decades, the UAW has decided to put one U.S. automaker at a competitive disadvantage to the other two. It almost seems as if they are angry Ford has done so well without a Government/Union takeover and hope to sabotage Ford’s success and so punish Ford for making a smart business decision instead of crawling to the Government and UAW for help. Would the UAW really behave this way? Maybe!
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