Ford Stock Slips as GM Exits Bankruptcy
July 10, 2009
By Bill Visnic
Shares at Ford Motor Co., which had buoyed in recent weeks but began sliding with news of a still-sputtering U.S. economic recovery, slid further on Friday after rival General Motors Co. slipped the shackles of Chapter 11 bankruptcy off after just six weeks.
Ford's share-price slide -- by midday on Friday after GM's emergence from bankruptcy, shares had dropped just a few cents but were off meaningfully from morning gains -- could be coincidental with a continuing downward move in the broad market, but some analysts and investors remain concerned that Ford may be at a competitive disadvantage because of the enormous support the federal government is throwing at GM to assure its recovery.
By the end of the year, the U.S. Department of Treasury will have invested upward of $50 billion in GM, plus at least $5 billion more to lending unit GMAC Financial Services, which also now handles vehicle financing for Chrysler Group LLC.
Ford, meanwhile, has not partaken of government support, nor has its in-house lending arm, Ford Motor Credit. But Ford reportedly told Congress last month the company believes government assistance to GMAC has given GM (and Chrysler) certain advantages in auto financing.
Citing data from Bloomberg, Reuters reported in June that in competing bond offerings, Ford paid $107.5 million more than GMAC for every $1 billion it borrowed.
"Ford is the healthiest company in the intensive-care unit right now, and you don't want to push them over the edge," Reuters quoted Michigan Representative Mike Rogers as saying. "I don't want the third company to go into bankruptcy because the government put them there by making them artificially uncompetitive," he added.
Posted by Bill Visnic at 9:58 AM under Business , Companies , Ford | Comments (4) | digg this | Seed Newsvine
Here's a metaphor for how I view the "Ford is at a disadvantage" argument.
Imagine Ford, GM, and Chrysler are in a race. The race starts and Ford's car takes off, but GM and Chrysler's cars immediately break down. They haul those cars off to the sides and fix them up to be sleeker and faster than Ford's. Then they get back into the race - but Ford is already 200 laps into it. Are you going to bet against Ford?
Posted by: mirth | July 10, 2009 at 10:29 AM
Wall Street can make or break any company they choose. All they have to do is say "sell", and your $100 billion company is worthless tomorrow.
Posted by: canddmeyer | July 10, 2009 at 2:46 PM
You must admit that this is at least unfair to other automakers and at most unconstitutional. Government support for any industry, or in this case specific companies, undermines the free market system -- especially when that support is in the form of actual ownership of the company.
Posted by: greenpony | July 12, 2009 at 8:15 AM
greenpony - Government intervention (which will be short lived in this case) does not undermine the free market system. The free market does not exist in a vacuum and the US has always practices some intervention, for example in defence industries and other hi-tech areas. It is not unconstitutional, you just don`t like it but the founders never knew about cars and most other modern world things.
Posted by: guy1974 | July 14, 2009 at 7:58 AM