Bill Ford Rallies the Automobile Industry

It is clear reading this article with Bill Ford, that the Ford Motor company is likely to make it through this period of transition very successfully. The industry has been trending toward a plug and play manufacturing model for the past decade. Ford has wholeheartedly embraced it to not just make better cars but to maximize flexibility for the real transition coming down the pike.

The best thing that the USA and North America can do today to assert its stature in the world is to exit the global oil business as briskly as possible. The rest of the world can have all they want, but we are out of here Jack.

North America has access to unimaginable internal reserves provided we reduce our own consumption by two thirds over the next decade. Those reserves are best used for everything except transportation. By doing that, we free ourselves from having our conspicuous consumption impacting agriculture in Africa.

The promise made by EEStor is going to be met by either EEStor of a competitor inside the next five years. Immediately we will be driving electric cars with a three hundred mile range. Bill Ford is telling us that his organization is ready for it and can make the switch of the same dime. It is going to be the most abrupt technology switch in human history

Of course this overnight success took decades of focused work in the laboratory to pull of but the objective has never been in doubt.

And as Bill makes clear, there may be other winners out there also that need to be supported.

After saying all that, the North American was long overdue for a formal restructuring that forced global cost structures on the internal industry. You must be able to compete head to head in your own country and the UAW made the deals for jobs with these competitors and thus broke their own labour monopoly. They have now the pleasure of dealing with the natural result of such practices.

April 21, 2009

Bill Ford: Prepare for Auto Industry Transformation

The Ford scion believes it's a "cool time" to be part of the auto industry, despite ailing U.S. automakers

By Colin Sullivan

DANA POINT, Calif. -- Ford Motor Co.'s executive chairman offered a rare glimpse yesterday into the U.S. auto industry's corporate direction and culture, painting a bright picture for the sector even though Chrysler LLC and General Motors Corp. are flirting with bankruptcy.

Bill Ford, the great-grandson of Henry Ford, said the U.S. auto industry is facing an unprecedented financial crisis that has shaken its foundation. But, he said, the turn toward insolvency should mean opportunity for an "insular industry" that has long been mired in stale thinking.

"We haven't had a lot of revolutions, but boy, are we now," Ford said during an extensive interview here. "It's a really cool time to be part of this industry."

Executives at Chrysler and General Motors who are now taking marching orders from the White House might take exception to that statement, but Ford described the shakeup and government bailouts as essential for an industry that is more than a century old and has often been stuck in a rigid mindset. The old guard, Ford said, is no longer "fighting" the change to new technologies because it has no other choice.

At Ford Motor Co., for example, executives have decided to bring their global platform of vehicles, including smaller models that do well in Europe, to the North American market. Ford described the move as risky, given the recent dip in the price of gasoline, but he said the company is committed to efficiency over the long haul and the belief that a downsizing of the U.S. car market is inevitable when gas prices rebound.

"Nobody wanted change, really, within the industry," said Ford, describing a boardroom atmosphere that was hostile to talk of climate change, energy efficiency and environmental protection. "But I am so energized by what's going on now, I think it's fantastic."

The comments from Ford, who served as the company's CEO from 2001 to 2006, come amid signs that a bankruptcy at GM or Chrysler could disrupt operations for the entire U.S. industry and its supply chain.

Ford Motor Co. officials fear a bankruptcy filing could mean deeper concessions from unions and bondholders for Chrysler and GM, and leave the companies in better competitive shape.

Ford reiterated some of those concerns and said bankruptcy may not be the best option for the sector, especially as it leaves the future of hundreds of thousands of jobs in the hands of a single bankruptcy judge.

"One keeps reading about 'quick and easy' bankruptcies," he said. "I have a hard time believing it will be easy."

Call for stability

Ford was the only U.S. automaker of Detroit's Big Three to reject bailout funds from Congress. And many have credited Bill Ford for preparing the company while he was CEO faster than either Chrysler and GM for constrained oil supplies and the dawn of a carbon-constrained economy.

Ford, who sat for an interview during a forum hosted by Fortune magazine, said his priority from day one as CEO was to diversify the company's fleet to account for "whichever way the infrastructure breaks" over the next few decades. That meant developing cars powered by biodiesel, electricity, natural gas and oil all at the same time, even though predicting a victor among these options is still difficult.

"These are very, very quickly shifting technologies," Ford said. "It isn't clear to us now that ultimately there's going to be one winning technology."

Ford explained that the decision to slim down to a single global platform of vehicles – instead of varying platforms for North America, Asia and Europe – gives the automaker the flexibility to ramp up to, say, electric cars if consumers start pushing the market in that direction.

He called the strategy "a plug-and-play operation" that allows Ford Motor Co. to not bet on a single technology.

Still, Ford admitted the lack of stability in gas prices is a major problem. Indeed, consumers who had been rushing to buy smaller cars when gas was more than $4 a gallon have lately returned to purchasing bigger models, an issue Ford says should be addressed by government policy.

Ford said he would support a gas tax or a price on carbon to add some stability to the market that could send better signals to the auto manufacturers. Gyrations on the fuel side, he added

"The worst thing for us is instability, and, unfortunately, that's what we've been dealing with," Ford said.

"We have no idea whether we're planning the right vehicle or not."

Shifting dependencies?

To address the highs and lows of fuel prices, Ford would like to see a gas tax or a cap-and-trade system that establishes a hard price on carbon. He also wants the Obama administration to convene a summit of automakers, nongovernmental organizations and lawmakers to establish a "glide path" for vehicle technology.

A glide path would mirror the European model, which brought players together years ago to effectively select "clean diesel" as the vehicle of the near future, at least until hydrogen-powered or electric plug-in vehicles develop. Incentives from governments to enact the glide path made purchasing decisions easier for consumers, Ford said.

Ford said he is averse to picking winners and losers, but when the alternative is industrial collapse, he thinks the European model is a viable option.

"It worked," Ford said. "We've really lacked that in this country."

On batteries for electric cars, Ford conceded that Asian manufacturers are ahead in terms of building the actual batteries, even if U.S. companies are positioned to develop components and design cars to integrate the batteries. He sees the emerging market as a problem if Americans trade oil dependency for battery dependency.

"As a country, we're not well served to trade that one dependency for another," he said.

More broadly, Ford expects a "messy" fight on Capitol Hill over climate change and the future of his industry. But he also believes the political will is there to shape a federal law within the next year or so.

"We can't go on with cheap gasoline forever," Ford said. "It's just not a path that his country wants to go down."

Reprinted from Greenwire with permission from Environment & Energy Publishing, LLC. www.eenews.net, 202-628-6500

GM Considering Chapter 11

I consider this to be unfortunately, inevitable. The union cannot back off decades of worker entitlement, and they cannot protect their workers from direct competition in the same state. GM has tolerated this conflict because we have had a health product market for twenty five years and this allowed them to pass on the costs. It also allowed their competitors to build up massive new capacity in their North American markets.

It is time to pay. GM is down sizing right where they are no longer competitive. Chapter 11 will break all those contracts and refinance the industry. GM will emerge intact with the same cost structure as Toyota down the street. And if no one likes it, it is too bad. Remember the bad old days at British Leyland. The cleanup was ugly, but it saved the industry in the end.

There is a global price to pay for a service, just like there is a global price to pay for a commodity. Juicing it up sooner or later opens the door for your competition to wreck your margins. Union leaders cannot afford to admit this, so they always run out the clock.

GM considering Chapter 11 filing, new company: report

http://www.freedomsphoenix.com/Find-Freedom.htm?EdNo=001&At=045691

Sat Feb 14, 2009 4:03pm EST

CHICAGO (Reuters) - General Motors Corp, nearing a Tuesday deadline to present a viability plan to the U.S. government, is considering as one option a Chapter 11 bankruptcy filing that would create a new company, the Wall Street Journal said in its Saturday edition.

"One plan includes a Chapter 11 filing that would assemble all of GM's viable assets, including some U.S. brands and international operations, into a new company," the newspaper said. "The undesirable assets would be liquidated or sold under protection of a bankruptcy court. Contracts with bondholders, unions, dealers and suppliers would also be reworked."
Citing "people familiar with the matter," the story said that GM could also ask for additional government funds to stave off a bankruptcy filing.

GM declined to comment, the story said.

General Motors and Chrysler LLC face a Tuesday deadline to file restructuring plans to the government in exchange for receiving $17.4 billion in federal loans.

Automakers have struggled as U.S. auto sales have tumbled amid a recessionary economy. U.S. auto sales in January tumbled to a 27-year low.

GM has been in talks with bondholders and the United Auto Workers union to get an agreement on a restructuring that would wipe out about $28 billion in debt for the auto maker, sources have told Reuters. However, it appears unlikely a deal could be reached by the Tuesday deadline, they said.

GM has already announced plans to cut 10,000 salaried workers worldwide, or 14 percent of its staff, impose pay cuts for most remaining white-collar U.S. workers and has offered buyouts to its 62,000 U.S. workers represented by the UAW.

In addition, it is trying to sell its Hummer SUV and Swedish Saab brands and is reviewing the status of its Saturn brand.
(Editing by Eric Walsh)

Chapter 11 Solution for USA Auto Industry

A question now needs to be asked about the current state of the global economy. The banking system has been stabilized because it had to be. The magic of reserve banking is that if your reserves expand you are allowed to expand your loan portfolio by the appropriate multiple. This all works because the banks have a monopoly on deposit management and it is all tightly regulated or at least used to be in order to prevent the type of crisis we just got hit with. It is the natural nature of competition that forces the imposition of regulation on this particular business. After all if you lend recklessly for a short while, your earning performance will give you bragging rights among your peers.

Unfortunately the reverse magic happens when confidence fails. The limited cash evaporates and the loan contracts can never be sold for immediate liquidity. In these circumstances, governments must step in and provide liquidity. Once confidence returns, the multiples will reexpand and the banks will repay the bail out loans. And everyone will wonder what it was all about.

The best assurance that an investor can have is to hear bankers complaining about their rules.

That begs the next question. What about the auto industry? Their lease portfolio is good and likely needs a mere assist there to get access to cheap money. After all they are not deposit taking institutions.

The manufacturing situation is a vastly different story. This industry has moved heaven and earth to accommodate the cost structures imposed by their employee unions and the grossly distorted medical insurance system. They have shifted as much manufacturing off site as possible and they demanned as much as possible. The bottom line is that they are premium prices for labor in a market were their competitors are not and that includes their newly built North American competitors. It must be fixed and fixed now.

The simplest solution is not to write large governments checks unless it is to provide bridge financing while the industry passes through chapter 11. That puts all union contracts and debt obligations and other such contracts into the proverbial cocked hat for a complete restructuring and puts all stakeholders on the same side working together to stave of sudden death.

And done properly, there is no reason to destroy the shareholders or the debt holders since the industry will be immediately profitable, though needing time to rebuild reserves and reduce debt.

The point that I am making is that the woes of the auto industry stem from its structural problems, not visibly shared by their competitors. Re structuring now will end the charade that they can compete against competitors on the world stage where their cost structures do not apply.

Starting immediately, the US auto industry needs to manufacture small electric auto carts as fast as possible. Their range may be only forty miles, but everywhere except the USA and Europe, this will not matter much, and we will get over it.

The real emergency is that the USA must begin reducing oil consumption very aggressively and our personal transportation is essentially obsolete. Very likely you will receive a fuel ration that will let you drive the old SUV 5,000 miles per year. And second cars will become hanger queens. An electric auto cart solves the problem by providing urban transportation. And surprise, surprise, you will discover that occasional long haul travel will generally not exceed that 5000 miles for the majority.