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http://www.forbes.com/2008/10/27/au...acturing-cz_jm_1028ford.html?partner=yahootix

Detroit - In the talks between General Motors and Chrysler, no one has more at stake than Ford Motor

The entire U.S. auto industry is teetering, and it wouldn't take much to push Ford (nyse: F - news - people ) over the edge. A bankruptcy filing by GM (nyse: GM - news - people ) would surely do so, since it would give GM an opportunity to toss out costly labor agreements and supplier contracts, leaving Ford at a competitive disadvantage. Ford wouldn't be able to survive very long paying higher costs for labor and parts than GM.

But if GM and Chrysler do merge--potentially with assistance from the federal government--Ford stands to gain the most. Credit Executive Chairman William C. Ford Jr. for that. His decision to dial back Ford's ambitions in recent years left the company in a fundamentally stronger position than either of its Detroit rivals.

That doesn't mean Ford is healthy. The automaker lost $8.6 billion so far this year. Expect poor third-quarter results on Nov. 7. Despite massive cost-cutting, Ford is burning cash at a rate of $1 billion per month. Through September, Ford sales are down 17%, and analysts predict October sales will be even worse.

But under Bill Ford and his successor as chief executive, Alan Mulally, Ford's done a good job lately of getting its house in order, and if it's not dragged down by a GM bankruptcy in the next year or two, Ford will be in good shape to take advantage of an economic rebound when it comes.

One reason: a fairly comfortable cash cushion. As of June 30, Ford had $26.6 billion in cash (probably down to $23 billion in the third quarter). That's because shortly after Mulally's hiring in fall 2006, Ford mortgaged virtually all of its assets to obtain a $23 billion line of credit that would ensure it had adequate liquidity to restructure.

The move was considered risky at the time, but in retrospect, it looks smart. Ford was able to access the credit markets before the door slammed shut for automakers. If GM had taken similar action, it probably wouldn't be seeking capital now by trying to buy Chrysler from private equity firm Cerberus Capital Management (and the $11.7 billion on Chrysler's balance sheet).

Aside from its balance sheet, Ford's relative strength during the current crisis is due mostly to Bill Ford's "back-to-basics" directive earlier this decade and to Mulally's grip on reality during his two years in charge.

After a disastrous expansion under former Chief Executive Jacques Nasser in the late 1990s, Bill Ford wrested control of the company and sold off non-core operations. He forced out the head of Ford Motor Credit (nyse: FCJ - news - people ), too, tightening lending terms five years ago and resisting the temptation to get into the mortgage business that had been so lucrative for GM's former captive finance company, GMAC (nyse: GJM - news - people ).

That conservatism meant Ford Credit probably missed out on the chance to reap its share of the housing boom three or four years ago, but it also avoided the ugly mortgage meltdown that followed.

Now Ford Credit is a key to Ford Motor's survival. Unlike GM, which sold a 51% interest in GMAC to Cerberus in 2006, Ford steadfastly refused to sell its finance company, which it considers a strategic asset.

An automaker's finance arm is more than just a bank that lends money to consumers and dealers, says Andrew Shapiro, managing partner at Casesa Shapiro Group. "At the end of the day, it's a marketing tool" that can be used to help manage inventory, he says.

GM lost that opportunity when it ceded control of GMAC to Cerberus. It paid the price recently when Cerberus--likely seeking to pressure GM into a deal for Chrysler--announced GMAC would no longer provide loans to consumers with credit scores below 700. That choked off sales at GM dealerships, forcing the automaker to spend precious millions on a national advertising campaign to reassure consumers that credit was still available (through other lenders) for GM vehicles.

The moral of this story is don't lose control of your captive finance company. When sales of a certain model turn soft, for instance, Ford can turn to Ford Credit for subsidized incentives to woo buyers and make way for better-selling models.

Though Ford has clung tightly to Ford Credit, it sold weak brands like Jaguar, Land Rover and Aston Martin. It would sell Volvo tomorrow if it could find a buyer, and it is considering selling part of its controlling stake in Mazda (other-otc: MZDAF.PK - news - people ).

Operationally, Ford is getting better, too. Its quality ratings are now among the world's best, and under Mulally's vision of "one Ford" worldwide, it is working hard to combine product development efforts around the world, which will lower costs and boost manufacturing efficiency.
 

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Where in there does it actually give any sort of reason as to the deal helping Ford? It just enumerates reasons as to why Ford is stronger.
1) If GM and Chrysler declare bankruptcy, then can shed the union and legacy costs, and out-spend Ford into oblivion.

2) If they do merge, the resulting company will be weak and mismanaged, and Ford will pick up the sales from their slow death.

Dubious at best, but that was the point they were trying to make.
 

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It states that if the government gives money for the merger then ford could get money also as a ''fair treatment'' compared to GM - Chrysler deal.
Do realize the money would be coming from the $25b piggy bank. The rest of it would be intended to work as originally planned. GM/Chrysler is asking for the money or will risk laying off more employees.
 

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1) If GM and Chrysler declare bankruptcy, then can shed the union and legacy costs, and out-spend Ford into oblivion.

2) If they do merge, the resulting company will be weak and mismanaged, and Ford will pick up the sales from their slow death.

Dubious at best, but that was the point they were trying to make.
Those are both IFS, none of which are mentioned in the article...
 

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http://www.forbes.com/2008/10/27/au...acturing-cz_jm_1028ford.html?partner=yahootix

Detroit - In the talks between General Motors and Chrysler, no one has more at stake than Ford Motor

The entire U.S. auto industry is teetering, and it wouldn't take much to push Ford (nyse: F - news - people ) over the edge. A bankruptcy filing by GM (nyse: GM - news - people ) would surely do so, since it would give GM an opportunity to toss out costly labor agreements and supplier contracts, leaving Ford at a competitive disadvantage. Ford wouldn't be able to survive very long paying higher costs for labor and parts than GM.

But if GM and Chrysler do merge--potentially with assistance from the federal government--Ford stands to gain the most. Credit Executive Chairman William C. Ford Jr. for that. His decision to dial back Ford's ambitions in recent years left the company in a fundamentally stronger position than either of its Detroit rivals.
.
It's the first thing they said!
 

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How about these merger thing is a bluff, to get goverment auto- aid.
I believe the merger is GM's way of killing 2 birds with 1 stone:
1) Steal Chrysler's cash
2) Eliminate the competition (no matter how weak they are)

The problem with here is that GM still have not tackled their core failures as a company and as a business.

GM has cancer. In order to cure cancer, GM must cut it out. In GM's case, it's the bad business processes, poor business habits, poor strategy, old GM-style thinking, and a "we're better than you" attitude. After all these years of restructuring and shuffling, these core problems remain. What GM is attempting to do is graft on something to prolong its existence. That's not how you cure cancer, especially when GM is grafting on something equally as cancerous.

Ford's strategy on the other hand has been to fix processes, adapt its global lineup to truly be a worldwide lineup. Mullaly is revamping processes and reworking Ford's strategy. They are essentially reinvesting in themselves, ensuring that when the economy rebounds, they will be in a prime spot to run hard. Ford's issue is simply cash drain, while they essentially retool the entire company.

When the upswing hits GM, they may do well, but they will still have cancer. And if you look at the structural makeup of the company, they are so severely susceptible to market swings now, that they simply are no longer the GM of old, except they continue to act like it. GM needs new leadership and a new attitude -- one that accepts the realities of today.
Without these critical changes, GM will be dead of cancer.
 

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I believe the merger is GM's way of killing 2 birds with 1 stone:
1) Steal Chrysler's cash
2) Eliminate the competition (no matter how weak they are)

The problem with here is that GM still have not tackled their core failures as a company and as a business.

GM has cancer. In order to cure cancer, GM must cut it out. In GM's case, it's the bad business processes, poor business habits, poor strategy, old GM-style thinking, and a "we're better than you" attitude. After all these years of restructuring and shuffling, these core problems remain. What GM is attempting to do is graft on something to prolong its existence. That's not how you cure cancer, especially when GM is grafting on something equally as cancerous.

Ford's strategy on the other hand has been to fix processes, adapt its global lineup to truly be a worldwide lineup. Mullaly is revamping processes and reworking Ford's strategy. They are essentially reinvesting in themselves, ensuring that when the economy rebounds, they will be in a prime spot to run hard. Ford's issue is simply cash drain, while they essentially retool the entire company.

When the upswing hits GM, they may do well, but they will still have cancer. And if you look at the structural makeup of the company, they are so severely susceptible to market swings now, that they simply are no longer the GM of old, except they continue to act like it. GM needs new leadership and a new attitude -- one that accepts the realities of today.
Without these critical changes, GM will be dead of cancer.
People talk about gm's mangament and how chaper 11 will be better, well boeing filed chaper 11 and has a new managment and this year they've been on stike for three week's now.
 

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People talk about gm's mangament and how chaper 11 will be better, well boeing filed chaper 11 and has a new managment and this year they've been on stike for three week's now.
Boeing's never filed for Chapter 11. They acquired McDonnell-Douglas, and then for whatever reason the McD-D team took control of Boeing, which nearly decimated the company. But after some scandals, they were ousted. Some new decisive decisions were made (787, 747-8) along with a redoubling efforts in sales and more modern products, and now Boeing's sailing pretty.

The key was to truly raise the bar in the market. They created a product that was so advanced that Airbus won't have an answer for it 3-5 years after Boeing launches. Boeing bet big on "greener" technologies in a time where being green wasn't in vogue. And Boeing bet big on what they saw was a shift in airline and airport dynamics. And they hit the nail on the head on everyone. It proved that they still had influence and knowledge and control of the marketplace. And with their gaming changing plane, they're going to rewrite the market.

The difference with GM is that they believe they influence the market. They don't. They believe that their products are better. They aren't. GM bet big on green technologies far too late, only well after they were in vogue. GM believes it's a game changer. They're not. GM believes they're the market leader. They're only leader in sales -- for now. GM has an arrogance about itself that is holding them back from recognizing the true gravity of their situation. The one thing that can possibly save GM is the Volt. It is their game changer -- and it is a real game changer too. But if the recession lasts into 2010 -- which i might -- customer demands/desires will be more in line with cost savings, rather than frivolous pursuits, like $40,000 green cars. But if Volt becomes successful, then we'll see the market rewritten in a matter of years -- using GM's rules. Problem is, GM doesn't have the cash to operate for 5 years; they can barely go 5 months.

For GM, it's all or nothing. GM's cards are on the table. THe question is, "Does GM have a Royal Flush, or are they bluffing with 2-pair?"
 

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Well still whating for this so call merger, which seem's too boil down to just talk. And a lot of that talk is comeng from these media.
We know that GM is talking to the government about funding.
Their argument is probably something along the lines that GM will collapse without the parts provided by Chrysler's suppliers, which will fold, should Chrysler fold.

GM's strategy also hinges on the elimination of Chrysler and some of its brands from the marketplace. That is, instead of GM shrinking itself (which it should), GM will force the shrinkage of the number of competitors. I mean, it makes sense in some convoluted way.

GM can then cherry pick the best of Chryslers: Viper, Grand Caravan/Town & Country, Challenger, 300, and Jeeps (sans the Non-trail-rated Liberty).
 

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The answer is in the first 2 paragraphs.
Read it again.

:confused:
Well no, if GM does get the entire $10b loan, this would come out of $25b. The rest of the loan it would be intended to work as originally planned. The remaining $15b would be used to retool the plants.

GM would be using this cash to ensure job security, a completely different twist to something originally thought of, not giving Ford any sort of advantage. At best giving Ford more of a disadvantage.
 

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We know that GM is talking to the government about funding.
Their argument is probably something along the lines that GM will collapse without the parts provided by Chrysler's suppliers, which will fold, should Chrysler fold.

GM's strategy also hinges on the elimination of Chrysler and some of its brands from the marketplace. That is, instead of GM shrinking itself (which it should), GM will force the shrinkage of the number of competitors. I mean, it makes sense in some convoluted way.
Those aren't arguments that will get a company money, announcing that you may potentially lay off 300k employees is what is disturbing and will allow GM access to that money.
GM can then cherry pick the best of Chryslers: Viper, Grand Caravan/Town & Country, Challenger, 300, and Jeeps (sans the Non-trail-rated Liberty).
Dodge is near to selling the rights on the Viper.
 

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I believe the merger is GM's way of killing 2 birds with 1 stone:
1) Steal Chrysler's cash
2) Eliminate the competition (no matter how weak they are)

The problem with here is that GM still have not tackled their core failures as a company and as a business.

GM has cancer. In order to cure cancer, GM must cut it out. In GM's case, it's the bad business processes, poor business habits, poor strategy, old GM-style thinking, and a "we're better than you" attitude. After all these years of restructuring and shuffling, these core problems remain. What GM is attempting to do is graft on something to prolong its existence. That's not how you cure cancer, especially when GM is grafting on something equally as cancerous.

Ford's strategy on the other hand has been to fix processes, adapt its global lineup to truly be a worldwide lineup. Mullaly is revamping processes and reworking Ford's strategy. They are essentially reinvesting in themselves, ensuring that when the economy rebounds, they will be in a prime spot to run hard. Ford's issue is simply cash drain, while they essentially retool the entire company.

When the upswing hits GM, they may do well, but they will still have cancer. And if you look at the structural makeup of the company, they are so severely susceptible to market swings now, that they simply are no longer the GM of old, except they continue to act like it. GM needs new leadership and a new attitude -- one that accepts the realities of today.
Without these critical changes, GM will be dead of cancer.
This is why I started frequenting this forum more often. Ford is finally making all the right moves, and so I have very little to criticize on their part. GM, on the other hand...

Ford, in my opinion, was messed up FAR worse than GM was, as recently as 4-5 years ago. They were dead right to cut loose all the non-core operations and brands. I know you disagree with getting rid of JLR/AM, but they were money-sucking distractions, brand cachet or not. In order to maintain brands like those, you need a level of cash commitment that Ford can't provide at this time.

Even look at Cadillac and Lincoln. Both were badly damaged brands by 2000. Badly damaged.

GM went big, and tried to bring Cadillac back with a shock and awe investment that yielded the Sigma cars.

Ford, hurting for cash, decided a longer-term, Lexus-style investment in Lincoln would be more appropriate. Ford wasn't serious about bringing Lincoln head to head against Mercedes-Benz, but Lincolns do compare favorably to Acura and Lexus, and while not high luxury, there certainly is a market there.

GM ran out of cash, so now we have a confusion situation at Cadillac. We have the CTS, which is very nice, but what else?

GM dreamed big with Cadillac, and Ford was realistic with Lincoln. I don't think I would ever pull the trigger on a Lincoln, but I think from a business perspective, Ford made the wiser investment.
 

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Ford, in my opinion, was messed up FAR worse than GM was, as recently as 4-5 years ago. They were dead right to cut loose all the non-core operations and brands. I know you disagree with getting rid of JLR/AM, but they were money-sucking distractions, brand cachet or not. In order to maintain brands like those, you need a level of cash commitment that Ford can't provide at this time.
I still don't agree with the sale of Jaguar/Land Rover. It is a necessary part in what I believe will be true global entity in Ford. I still believe the cut should have been Mercury. It's a dead name with little recognition and respect. And the only problem with JLR was Jaguar. Land Rover was and remains quite profitable.

Even look at Cadillac and Lincoln. Both were badly damaged brands by 2000. Badly damaged.
Yes.

GM went big, and tried to bring Cadillac back with a shock and awe investment that yielded the Sigma cars.
Yes.

Ford, hurting for cash, decided a longer-term, Lexus-style investment in Lincoln would be more appropriate. Ford wasn't serious about bringing Lincoln head to head against Mercedes-Benz, but Lincolns do compare favorably to Acura and Lexus, and while not high luxury, there certainly is a market there.
I wouldn't say it was a "Lexus" style investment. But I see your point. But I don't agree with "favorable comparison" though.

GM ran out of cash, so now we have a confusion situation at Cadillac. We have the CTS, which is very nice, but what else?
I wouldn't say CTS is "nice." It's acceptable. But it's maligned.

GM dreamed big with Cadillac, and Ford was realistic with Lincoln. I don't think I would ever pull the trigger on a Lincoln, but I think from a business perspective, Ford made the wiser investment.
GM was absolutely 100% correct to dream BIG with Cadillac!!
That is the ONLY way for Cadillac to succeed in this market. It needs a big splash. It needs to be the best of the best. Why? The original intention for Cadillac was to challenge Mercedes!
But as we can see now, Cadillac's execution of that strategy and goal has been so far off the mark.

It is poor execution that has doomed Cadillac, not the dream and certainly not the goal. It was a costly underestimation of the strength of Mercedes and BMW.

Now Cadillac is back to a level unbecoming of its name and heritage. (And there remains a bunch of lemmings on this site willing to accept it.)
 
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