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DETROIT – Ford Motor Co. will tell Congress that it plans to return to a pretax profit or break even in 2011 when the Detroit Three automakers' CEOs appear before lawmakers this week to request $25 billion in government loans.
Ford CEO Alan Mulally said he'll work for $1 per year if the company has to take any government loan money.
After grilling the CEOs at hearings last month, Congressional leaders demanded plans from the automakers by Tuesday to show that they will survive if they get federal funds. The plan Ford submitted said the company will cancel all management employees' 2009 bonuses and will not pay any merit increases for its North American salaried employees next year.
The company also said it will sell its five corporate aircraft. The CEOs of all three Detroit automakers were harshly criticized during last month's hearings for flying to Washington in separate corporate jets.
Mulally said in an interview with The Associated Press on Tuesday that Ford will give much more detail to Congress than it did previously, and the company will emphasize the steps it has taken to cut its labor costs with the United Auto Workers union.
Mulally said Ford will seek $9 billion as its share of the loan money but may not need to use it. The Dearborn-based company has said it has enough cash to make it through next year without assistance.
As part of the plan submitted to Congress, Ford said it does not anticipate a liquidity crisis in 2009, "barring a bankruptcy by one of its domestic competitors or a more severe economic downturn that would further cripple automotive sales." The loan would provide a safeguard against worsening conditions, the company said.
The company said it will accelerate plans to roll out electric vehicles as part of its plan.
"We are going to do that across our product line," Mulally said in the interview.
The first plug-in vehicle will be a Transit Connect small van for commercial use in 2010 and a car the size of the Ford Focus compact the following year.
Ford also said it will accelerate plans for hybrid gas-electric vehicles.
Mulally said he will encourage automakers and parts suppliers to join forces to develop new battery technologies in the U.S. for future electric cars so the country doesn't rely on foreign batteries.
"We don't want to trade oil for batteries," he said.
Ford's plan calls for an investment of up to $14 billion to improve fuel efficiency over the next seven years. The company said would improve the overall efficiency of its fleet by an average of 14 percent in 2009.
The CEOs of the Detroit Three are scheduled to appear before congressional committees Thursday and Friday. Chrysler LLC and General Motors Corp. have said they are perilously low on cash and need the government loans to survive the recession and the worst auto sales environment in 25 years.
GM and Chrysler were to submit their plans to Congress later in the day. At an appearance in Baltimore on Tuesday morning, Chrysler President and Vice Chairman Jim Press didn't give details of the business plan that Chrysler will present, but said it will tackle product mix, vehicle pricing and quality and fiscal responsibility.
Press said all players, including banks and labor, have agreed to "all the concessions that are necessary."
The CEOs were skewered on their first visit in November, when lawmakers criticized them for high labor costs and products that aren't competitive with foreign automakers.
"I think we learned a lot from that experience," Mulally said in the interview, adding that the CEOs were there last time to discuss the progress of the industry, not a plan for viability.
Ford's new plan is 32 pages long, plus an appendix, and it includes much detail that was lacking during the first visit.
The company says its plan to achieve profitability or break even by 2011 is based on industrywide sales estimates of 12.5 million units in 2009, 14.5 million in 2010 and 15.5 million in 2011. The seasonally adjusted annual sales rate dropped to 10.6 million vehicles in October.
Ford shares rose 25 cents, or 9.8 percent, to $2.80 in midday trading.
Ford's plan said it will reduce its number of dealers by 606 to 3,790 by the end of the year. It will also trim the number of major sourcing suppliers it uses to 750 from 1,600.
Ford reiterated its intention to offload Volvo, by either selling the Swedish automaker or spinning it off into a separate company. Since 2007, Ford has sold its Jaguar, Aston Martin and Land Rover lines. It also sold most of its stake in Mazda.
 

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I wonder how many members of congress would volunteer to take a pay of $1 a year to help with the economy?

The thing that really bothers me in this whole Big 3 bailout, is where does Chrysler come off asking for money since they've been aprox. 80% privately owned for the last year!!!???
 

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It may just be BS to look good....but Ford had the idea and plans to make good on it while the others are still holding on their twigs and berries.
 

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Actually, Chrysler CEO Bob Nardelli was initially the only CEO to offer to work for $1. Mulally said "I think I'm OK where I am." ,and Wagoner didn't answer the question. They have both now reconsidered. Fact is, their salaries aren't going to make much difference, but it's still a good thing for them to do. Now, if all the other high paid execs would do the same...
 

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bigb427 said:
I wonder how many members of congress would volunteer to take a pay of $1 a year to help with the economy?
I don't agree with a lot of what the elected officials in Washington do, but most congressmen don't live in the lap of luxury. CNN had a special on the other week showing what Spartan accommodations that most members of Congress live in while in Washington DC.
 

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This whole thing makes me mad and I just don't want to go there!

I hate what is happening!!!!!!!!!!!!!

Mel
 

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Dont even get me started!
The only thing I can say is Buy American!
 

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Just read that Mullaly is driving the 550 miles to D.C. for the next meeting .

Someone got the idea .
 

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Salary thing means nothing. Buy American means nothing. There will be no real change until industries realize that they are NOT too big to fail. As long as there is a security blanket called the Federal Government, there will be no real changes.

Someone bail out the company I work for. Our employees would feel better if they knew the federal government was essentially going to guarantee their jobs. Oh wait, we live in the REAL world, where management's job is to take the revenue stream the market gives you, and find a way to make a profit from it. This sometimes means tough decisions. Life sucks. Suck i up and be an adult. Stop whining about the fact that you cannot run a business.

The only way I support ANY kind of bailout for hte auto industry is if they fire 100% of the management currently in place. Whatever the sympton is, it all traces back to pooh-for-brains management that couldnt manage their way out of a paper bag.
 

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The $1 may look good on paper but what will the CEOs really get? With all the perks I would bet it still runs in the millions.Don't get me wrong I think everyone should buy American and hope they make out.
 

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Speaking out, while giving a big sigh...I just don't like this subject, I have way too much passion regarding it!

I have always from long ago said, "BUY AMERICAN" I never really saw the difference in quality everyone talks about or the fact that any of the cars on the market are very inspiring. That being said, I want to ask this.

What the heck is wrong with the auto industry or any other industry asking the government for a loan. If the government would look at the assets and figure out if the loan is worth making and if the risk is worth the return. Yes the assets include private jets, and what the heck does it matter if these corps have jets? I think that if that is an asset we as tax payers can sell if they default on the loans, the all the better. How efficient is it if the execs go to Washington in a car and waste two day when they could merely waist anywhere from a few hours to a day and get back to trying to turn around these businesses?????

I think this whole thing stinks and flies in the face of everything capitalistic! I think if these companies fail, we as a country will fall into a full blown depression and everyone should hold on!

I think we are in between a rock and a hard place. What is the answer? I think the answer is since the government is printing money, they should give everyone who is here legally and who is 18 or older a large enough amount of money for them to actually do something with. $25-50k or so. Give vouchers to be used in retail, or cars or something like that...Should get the economy moving...

Just spitballing here...This all stems from the fact that no matter how good the deal is of how good the company is very few loans are getting approved. the darn banks need a nudge here.

Dang it...I didn't want to get started, I have way too much to say on this and frankly it scares the heck out of me. I am in a lousy position and am just not happy about that, and I am not getting any sort of bailout. My own fault I am in this position and as I work to get out, I think it only fair to allow others to work their way out as well.

If the government is going to do a stimulus then do it and do it right and make it meaningful!

OK, crap, I gotta get off this soap box, someone get em a step stool to get down with.

Thanks for letting me vent, Bob....I am just frustrated....

(Steps down off soap box and walks away with head down)

Mel
 

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If they could just do away with the Union workers and the retiree benefits, they would be profitable again.

I read somewhere that about 40 cents of every dollar GM makes goes to pay their retiree benefits. Something's wrong there.

Do away with the Union workers and their benefits, and they will become profitable again. I notice that Toyota isn't asking for cash, and their workforce is structured from employees without unions.

IMHO, unions are nothing more than big bullies. Just a way to muscle your way into a better life at the expense of others, which isn't right. Sorry if I step on toes here, but a factory assembly worker shouldn't be getting top dollar wages for putting seats in a car. That's a minimum wage job requiring little to no skill.

Like always, millions of factors are playing into this whole "crisis," and there isn't really a way to isolate this into one single problem. It's years and years of different mistakes that caused this problem, and it'll probably take just that long to get out of the pit these people have dug for themselves.

My idea: File for Chapter 11. Deunionize the workforce. Eliminate extravagant pensions and benefits.

Just my 2 cents.
 

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CantedValve said:
Salary thing means nothing. Buy American means nothing.
.... As long as there is a security blanket called the Federal Government, there will be no real changes.
I could not possibly agree more with those statements.



CantedValve said:
The only way I support ANY kind of bailout for hte auto industry is if they fire 100% of the management currently in place. Whatever the sympton is, it all traces back to pooh-for-brains management that couldnt manage their way out of a paper bag.
I do disagree with you on this, I suggest you read Michael Niehuus' post above. While the big three's management has made poor decisions for sure, the REAL problem is the big three are being held hostage so to speak by the UAW. The big three have to pad the price of their cars by an average of $2000 EACH to cover expenses directly related to UAW contracts. Look in your mirror or out your window - the American work force is to blame for this problem.
A bailout contingent upon major restructuring of UAW contracts or completely eliminating them with non-union salaries & retirement plans is the only realistic option. Whether or not this happens, we can only guess and hope for it to for the long term benefit of our economy.

I would love for someone from Chrysler, or the media, or whomever to explain why & the heck they deserve any money when they were sold for 7.4 billion dollars last May to Cerberus Capital Management, with neither Chrysler OR Cerberus Capital Management being a publicly traded company on the stock market currently. I have only heard of Chrysler exec's being in attendance at the Washington hearings, not Cerberus execs.
Doesn't make sense to me.
 

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Jim said:
Actually, Chrysler CEO Bob Nardelli was initially the only CEO to offer to work for $1. Mulally said "I think I'm OK where I am." ,and Wagoner didn't answer the question. They have both now reconsidered. Fact is, their salaries aren't going to make much difference, but it's still a good thing for them to do. Now, if all the other high paid execs would do the same...
Ack, Bob Nardelli :loco: is the CEO of Chrysler, he went there after he screwed up Home Depot.
 

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Can America Survive Without Detroit?

Columnist Ed Wallace argues that letting Detroit fail would cripple not only America's economy but also its psyche.

BusinessWeek.com 12/02/08 by Ed Wallace

America thinks it's debating the logic of bailing out Detroit, but what we are actually talking about is the future of American manufacturing.
In the current financial mess, General Motors (GM), Ford Motor (F), and Chrysler find themselves unable to sell enough cars to survive into a potentially brighter future. Judging by what's being said in the press, in Congress, and by some of the most respected names in American business, the nation's response so far is a big "who cares?" I hate to point out distressing realities, but we ought to care. And yet, as is true of most of these national crises that seem to be cropping up far more often than they should be, the reporting and explaining of Detroit's jam seem to demonstrate both a profound disregard for facts and little understanding of the interconnected macroeconomics that empower or destroy our civilized world.
Let me ask you two questions:
1. Do you believe we should lend Detroit $50 billion to save itself from this economic turmoil?
2. Do you believe that we should lend the American economy $50 billion to save it for you and your children?
Not incidentally, those two questions might actually be the same.
Comparing Apples to Squid
Some heavy hitters in business and politics have weighed in recently on whether or not Detroit should be helped through this critical period. Jack and Suzy Welch were given column space in BusinessWeek, and the argument they laid out was both intelligent and thoughtful. Still, the Welches judge that Detroit's companies would be best served by reorganizing in federal bankruptcy courts, one day to emerge as lean, mean fighting machines. They say this would be the only way to "galvanize real change."
The Welches point out that many Americans fly on bankrupt airlines without giving it a second thought. To their point of logic, a Detroit bankruptcy would not harm consumer demand for their products and wouldn't lead to sales falling faster than the companies could be downsized.
But there is a huge difference between buying a $300 ticket on a bankrupt airline and signing a five- or six-year note on a new car for $25,000. If the bankrupt airline is flying that day, you can be fairly sure you'll reach your destination—as has in fact been the case with carriers such as Delta Air Lines (DAL), United Airlines (UAUA), and others while they were in bankruptcy. But not knowing whether a major repair would be possible, or covered, on an automobile years in the future would certainly send most potential buyers looking elsewhere for their next ride.
Detroit has it right: If its automakers declare bankruptcy, the likelihood of their emerging as viable businesses is near zero. Their sales will fall faster than they can reorganize.
Look for the Hand
A more vocal critic of Detroit has turned out to be failed Presidential candidate Mitt Romney. The former businessman has strong ties to Detroit, being the son of former Michigan Governor and American Motors Chairman George W. Romney, but his opinion piece in The New York Times on Nov. 19 was so factually challenged that you almost couldn't read it without feeling sorry for him. Romney talks of "insurmountable labor and retiree burdens, technology atrophy and product inferiority." Of course, setting aside money for the retirees' benefit packages should have been taken care of years ago, but apparently he missed the fact that a new contract was drawn up with the United Auto Workers last year that allows new hires in many positions to be paid as little as $14 an hour.
The significance of that was lost on most, but for the first time since World War I we will have people building automobiles in America who won't be able to afford the vehicles they build. Somehow we are led to believe that's real progress.
Romney goes on to discuss how Detroit's labor costs keep it from matching Japanese quality and automotive value one-on-one, comparing a Ford Taurus with a Toyota Avalon. Discussing the labor cost burden for Ford, Romney speculates that there is a $2,000 cost disadvantage for Ford. He says this lets Toyota (TM) add $2,000 worth of quality and features to its Avalon, making it the far more appealing purchase and the better value. Again, there's a fundamental flaw in his premise that five minutes' research could have corrected: In spite of the $2,000 "labor burden" he mentions on the Taurus, its list price is still $3,720 less than the Avalon's.
Using his logic, it's Ford that could add that unknown extra $2,000 worth of features and quality to the Taurus and still sell it for $1,720 less than the Avalon. Both get 28 miles to the gallon on the highway; the Avalon gets 1 mpg more in city driving.
One other important thing: So far this year, 46,167 Tauruses have been sold, down 20.2% from a year ago, while Toyota has sold 37,852 of the Avalon—down 37.9%. So, if he really understood what he was saying, Romney's position should have been: Why is the Avalon not selling better?
He also asserts: "[Detroit] management as is must go. New faces should be recruited from unrelated industries." Great idea, Mitt. Let's pick two of the best-known and most respected American corporations from which to pull the new leaders for Detroit. Say, Boeing (BA) and General Electric (GE)? While you were out campaigning, Ford and Chrysler already did that.
Imagine No Amber Waves
The media make much of the fact that Detroit's dealerships so greatly outnumber Toyota's. This extremely inefficient distribution chain, they say, weakens the average dealer, which in turn damages Detroit. To some degree that may be true, but what the media fail to take into account is how urban-centric that argument is.
One of the key reasons the Big Three have so many dealerships is that they have outlets in cities where Nissan (NSANY), Honda (HMC), or Toyota can't claim any type of business. Detroit's trucks may be taking a pounding right now in the press, but let Detroit go away and see what happens to American agribusiness.
That's right: Detroit has a strong presence across the Great American Midwest. In states like Kansas you will find GM dealers in no fewer than 54 counties, while Toyota dealerships can be found in only eight. The reality is that after a few planting seasons, given reasonable crop prices on the commodities market, one day sales of new pickup trucks will again make more money for Detroit than all of the Chevy Volts they may or may not make.
And are you really suggesting that American farmers be given the choice of Tundras or Titans in the future? What a wonderful parting gift for Japan.
One would think the media might be a bit more sympathetic to this crisis, given how many of that industry's jobs hinge on the outcome. After all, there are years when total automotive advertising can reach upwards of $15 billion annually. But not this year; and already we are seeing jobs melting away in the media—from radio stations to TV and with print publications—because of this automotive downturn. Let Detroit go away, and you're talking about a decade-long drought for the Fourth Estate.
Not to mention the impact it would have on professional sports. GM has already pulled sponsorships at some Nascar tracks and dropped the Super Bowl. In Dallas, Cowboys owner Jerry Jones is finishing up a $1 billion stadium; the almost $5 million he receives annually to make the Ford F-Series the official truck of the Dallas Cowboys could be critical income lost.
Why We Must Care
Additionally, if Detroit fails, the impact on the American psyche in tough economic times could be devastating. Letting Detroit fail will cost us far more than saving it—and the collateral damage will be far worse than anyone has yet imagined. If we are in the last days of Detroit, we will pay for it anyhow—with no chance of getting any of our money, or any of America's pride, back.
Detroit's pensions will go under the government-backed Pension Benefit Guaranty Corp., which will in time overwhelm that agency. Retired auto workers' health care will become a huge drain on our Medicare system, further straining its meager resources, while Detroit's displaced workers will start collecting unemployment. We will lose the income tax revenue from their workers, not to mention the tax revenue from their suppliers' workers, and so on down the line as they all become unemployed. And they won't have much if anything besides food stamps to spend, so there goes all that sales tax and interest income, too.
Cutting Off Our Nose to Spite Our Face
Let me make something perfectly clear: Detroit did not cause this current problem to happen. The automakers are as much victims of this period of financial deleveraging as you and I are. We were led here by 28 years of new government rules moving us toward "anything goes" capitalism—and that brand should never have been confused with American capitalism, in which laws protect buyer and seller and whose dealings are characterized by integrity, honesty, and sanity. I am an American capitalist, and I believe ours is the best economic system in the world—when its rules are not being bypassed for private gain and the public's loss.
But I'll give it to you straight: Let Detroit fail and we may not be able to stop the avalanche that has been burying people and businesses all year long. If you don't want to save Detroit, that's your ideology. But are you willing to risk America?
Americans love underdogs but hate losers. Bankruptcy would move Detroit into the latter column, and America wouldn't be far behind.
 

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I'm sorry, but that article was written by an industry homer, not a respected economist. If Detroit fails, Ed Wallace's journalism career goes with it. What would you expect him to say?

Ed Wallace said:
...for the first time since World War I we will have people building automobiles in America who won't be able to afford the vehicles they build. Somehow we are led to believe that's real progress.
If he believes that running a screw gun on an assembly line entitles one to an income to be able to afford a brand new car, then he has defined the crux of Detroit's problems.

The media make much of the fact that Detroit's dealerships so greatly outnumber Toyota's. This extremely inefficient distribution chain, they say, weakens the average dealer, which in turn damages Detroit...In states like Kansas you will find GM dealers in no fewer than 54 counties, while Toyota dealerships can be found in only eight.
He really thinks that a rural county in Kansas should have a GM dealership just so the farmers don't have to drive to a larger area to buy a truck? And don't say it's a service and repair issue, because GM could contract with independent repair facilities to do that.

So far this year, 46,167 Tauruses have been sold, down 20.2% from a year ago, while Toyota has sold 37,852 of the Avalon—down 37.9%. So, if he really understood what he was saying, Romney's position should have been: Why is the Avalon not selling better?
My first question would be (and I admit I don't know the answer): What percent of these two particular models that were produced actually sold? Has Ford had to produce more Taurus' than they can sell because of a union-driven production mandate?

Let me make something perfectly clear: Detroit did not cause this current problem to happen.
Of course the automakers didn't cause the recession, but the fact that they are unable to withstand it is no one's fault but their own.

Not to mention the impact it would have on professional sports.
YHGTBFKM! I think that quote is a good way to end my critique of his article.
 
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