Rejecting bailout wins political capital for Ford

Rejecting bailout wins political capital for Ford

Ford is reaping the benefits that go with being the only U.S. automaker not to take a bailout.

A little more than a year after the Big Three CEOs came to Washington for help, Ford has increased its share of the U.S. market, seen its stock increase six-fold over the last year and is hiring workers in a recession.


While General Motors was stigmatized as “government motors,” Ford’s data shows its brand reputation at a high level.

The company thinks this will also benefit it in Washington.

“I think we’re very much respected for … running a healthy business and not asking for taxpayer money,” Ford CEO Alan Mulally told reporters in Washington on Tuesday.

That could be important to Ford, which wants to be a player on a range of policies.

“Are we welcomed in the debate in Washington, D.C.? Absolutely,” Mulally said. “Part of our plan is we want to be a part of that discussion.”

Ford has an interest in talks on energy and the environment, where regulators will consider new fuel-efficiency markers for vehicles in 2016.

On trade, Ford opposes a pact negotiated by the George W. Bush administration with South Korea. Mulally on Tuesday also said currency manipulation is a concern. China has been criticized for boosting its exports to the U.S. by pegging its currency value to the dollar.

Ford will also want a seat at the table on “distracted driver” legislation that could affect new technologies Ford and other companies are adding to their vehicles, an area where Mulally said Ford thinks it has a competitive advantage.

GM and Chrysler are both going for a comeback, too, but face a tougher haul. Chrysler has merged with Fiat, while GM has appointed a new CEO, who said the company would repay the government $5.7 billion in June. The U.S. has given GM $50 billion, but most of that was converted into stock, making the government a part-owner of the company. It’s not clear how that investment will pay off.

Ford is carrying billions in debt, but it has lowered its debt level and analysts believe it could post a profit in 2009 when it announces its earnings on Thursday.

Mulally, who came to Ford in 2006 after serving as Boeing’s chief executive, was greeted in Washington by a full-page ad in The Washington Post. The Washington restaurant Sequoia purchased the ad to honor Ford for spurning a bailout.

Mulally also offered good news in Washington; he spoke after stories broke about his company hiring 1,200 workers to build Ford Explorers at a Chicago plant.

FHA looks to shrink

Thirty percent of borrowers are now getting loans backed by the Federal Housing Authority (FHA), a huge increase over the 3 percent of loans backed by FHA before the housing crisis.

That has raised concerns by stretching the FHA’s reserves. Under statute, the FHA is supposed to keep reserves of 2 percent of its loans, but that rate has fallen to just more than a quarter of that rate. Meanwhile, the percentage of FHA loans in default has jumped.

New rules announced by FHA last week, which must be approved by Congress, would increase FHA’s prices and provide some security for taxpayers, though they’ll also make it tougher for people to get FHA insurance.

The new rules would raise the premium borrowers pay for FHA backing. FHA also is reducing from 6 to 3 percent the amount of money a home seller can put up for closing costs, which means the borrower will have to come up with more cash.

Andrew Jakabovics, associate director for housing and economics at the Center for American Progress, said FHA’s share of the market could be reduced to 20 percent in the next 12 to 18 months. But he said this will depend in part on what the private sector does.

The new rules are welcomed by the private sector.

FHA’s changes “will make it more competitive to conventional lending,” said Teresa Bryce, president of Radian Guaranty. “We’d like more business to come our way and not FHA’s.”

Union, Tea Party unison?

Supporters of “Buy American” rules believe they have the political winds at their backs as they push for tough restrictions in the new jobs bill.

High unemployment will make it difficult for lawmakers in either party to argue against rules restricting the use of foreign materials in projects built with U.S. dollars.

Plus, notes Scott Paul of the Alliance for American Manufacturing, the Buy American rules are one of the few things union members and the Tea Party crowd agree upon. Neither group wants U.S. tax dollars going to pay for Chinese steel, he said.


Paul’s group is headed to congressional offices this week to call for the rules, already included in the bill approved by the House.

The rules in the House bill are similar to those in the stimulus in 2009, but do make it tougher, in some cases, to get a waiver from the rules.

The U.S. Chamber of Commerce and other business groups are lobbying hard on the other side. They say the rules in the stimulus were misinterpreted by state and local officials who, erring on the side of caution, went overboard in barring products made by foreign companies from inclusion in stimulus projects.