Friday, January 29, 2010

Bravo Ford

Much of the press on the calamitous state of the US auto industry centered around General Motors. Spare a thought for Ford, which has quietly done some amazing things.

Ford was the only one among the Big Three that did not take the US government bailout. They also were the only one that did not go into Chapter 11 bankruptcy. And yesterday, they announced pretty good 2009 results. They made a profit of $ 2.7 billion in 2009. Yes, t-h-e-y m-a-d-e a p-r-o-f-i-t- i-n 2-0-0-9 ; one of the most brutal years for the auto industry. They gained market share in the US. Their fourth quarter volumes were up 26%. By any standards, an impressive performance.

Sure the numbers hide some real worries (as they always do). Their main business of selling cars actually lost $1.4 bn in 2009. That loss was offset by their finance arm – Ford Motor Credit which made a profit of $1.9 bn. (just goes to show that taking a loan to buy a car is for suckers). But in Ford’s favour, in the fourth quarter, the car business too made a tidy profit. But by not going into bankruptcy, they are left with a huge debt on their balance sheet - GM and Chrysler have much lesser debt now as they “restructured their debt” (read shafted creditors). Such are the advantages of not choosing to go into bankruptcy.

And their endemic problem with the massive pension obligations of retired workers remains an intractable problem. Its an irony of sorts that companies can be ground to dust in paying large sums to keep the retired folks in comfort. Whoever invented the concept of a defined benefit for retired employees based on their last drawn salary for the rest of their retired life ought to be shot. As should the accountants who decided not to create a fund for it, but leave it unfunded for future generations to pay “somehow”.

But suddenly Ford is looking good. GM is still debating the merits of hiring an “outsider” as a CEO (the last refuge of a company bankrupt of ideas of how do run a business well). It decided to shelve this idea at least for now. Toyota’s woes in the US are making the headlines daily. Chrysler has virtually gone absent. The other Japanese giants are also wobbling a bit. Ford is gaining market share.

Detroit and the automakers have had nothing but bad news and abuse for many years now. Every bit of good news ought to be celebrated there.

Bravo Ford. Take a bow.