By Phoebe Wall Howard – Detroit Free Press
DETROIT – More than a decade after the latest economic crisis, Ford Motor Company continues to repay a giant government loan created through Congress at the beginning of the Great Recession for automakers to carry out plant projects.
Critics at the time targeted General Motors and Chrysler, and all noted bankruptcy and accepted government bailout loans through the U.S. Treasury Department’s Troubled Asset Relief Program (TARP). To reorganize the automotive crisis that affected the industry between 2008 and 2010. Meanwhile, Ford took a different path.
But in the end, he took out a government loan.
The debt remains on Ford’s books as the company is going through a pandemic.
In September 2009, Ford signed an agreement with the Department of Energy and borrowed $5.9 billion from a loan program created to finance automotive projects designed for U.S.-made automobiles. To meet the needs of increased mileage and decrease dependence on the U.S. Foreign oil.
The company is one of 3 newly indexed automotive beneficiaries in the complex generation vehicle manufacturing loan program.
While critics of government assistance, including Ford executives, still focus on the government bailouts, few have mentioned in recent years the loan program that handed out money during the same time period explicitly to shore up automakers.
Alan Mulally, then CEO at the time, praised his foresight of borrowing just before this crisis, adding the Blue Oval, because Ford struggled before others and acted before the others.
Ford, Nissan and Tesla are listed as loan recipients of a program that had strict financial solvency requirements to qualify. Nissan was awarded $1.6 billion for its Tennessee operations. Tesla garnered $465 million for California operations
Both Tesla and Nissan had fully repaid their loans as of September 2017, according to CNBC. Ford had not.
As Tesla’s stock soars, Ford runs to shore up his finances.
More interest-free lending creates an additional burden for Ford as liquidity decreases.
“As of December 31, 2019, a total of $1.5 billion unpaid,” Ford revealed in its new 10-K filing with the U.S. Securities and Exchange Commission. “The ATVM loan is refundable in quarterly installments of $148 million, which began in September 2012 and will end in June 2022.”
Documents filed through Ford show that the company owes bills of $591 million in 2020, $591 million in 2021 and $289 million in 2022.
“They’ll have to find a form of payment, or they’ll ultimately pay more for the loan privilege,” said Charles Elson, director of the University of Delaware’s Weinberg Center for Corporate Governance. “It’s the kind of thing that helps keep other people awake at night. This is a challenge at 3 a.m. for the control team.”
Dark days
During smart times, car analysts said, Ford may have raised cash and paid off his debt in anticipation of bad times. That’s not the case.
“It’s very ugly and very difficult now,” said Elson, whose public policy school is named after John Weinberg, Ford’s banker for years.
In his loan application, Ford said the money would be spent to improve thirteen services in Michigan, Illinois, Kentucky, Missouri, New York and Ohio, “resulting in meeting and production plants” with structure flexibility. Energy efficient cars that meet conversion demands.
The government’s online page notes that “Ford has several updated amenities to continue the fuel power of more than a dozen popular vehicles, adding the Escape, Fiesta, Focus, Fusion and Taurus models, as well as the F-150” soft truck.
In addition, the Fiesta has been built in Mexico. Production of Fiesta, Focus, Taurus and Fusion will have stopped until the end of 2020. The company solved an elegance action this year involving a faulty transmission in its Focus and Fiesta vehicles.
Ford is praised by the government for its “commitment to introducing new hybrid, plug-in and all-electric vehicles.”
Changing the zoquete
Ford says government debt bills are “relatively small” and not worried.
“The loan expires in June 2022. We plan to repay the loan in full and in time,” Ford spokesman T. R. Reid told Free Press on Tuesday. “At the end of the first quarter, the principal balance $1.3 billion.”
When asked if Ford had requested deferment of loan payments, Reid said more data would be disclosed in the long-term regulatory documents.
$5 billion in blues
Ford is not in the fight, however, he entered in 2020 with a much lower profit than expected compared to his competitors. The leaders expressed sadness and promised to do better.
Ford’s earnings report for the first 3 months of 2020 reflected a loss of $2 billion, the maximum of which was not similar to COVID-19. Ford then warned Wall Street that he expected a $5 billion loss in the quarter, reflecting the effect of plant closures between March and May.
Tim Stone, Ford’s leading monetary officer, said the corporate idea that he had enough coins to get 2020. Ford reported in April that it had $34 billion in coins and $35 billion in coins at the end of the first quarter.
Last July, Ford returned to the banks to apply for a $5.35 billion loan extension from the banks they added to J.P.Morgan Chase.
“The company will complete the expansion before its profits arrive on July 30,” Reuters said. “They must be ready to say something good. That they were able to achieve greater liquidity for some other year.”
Cash flow, or liquidity, is a lifeline during crisis.
On March 19, Ford announced that he borrowed $15.4 billion on two lines of credit. The company also withdrew its monetary functionality direction due to unforeseen circumstances.
“Ford Motor Company is taking a number of projects to increase the company’s money position amid the coronavirus fitness crisis,” the company said at the time.
However, the prices related to the renegotiation of monetary agreements are negligible, said Professor Kara Bruce of Toledo Law School, which specializes in bankruptcy and advertising law.
“I can tell you that when a company negotiates with its creditors, the bankruptcy option is at the forefront of those discussions,” he said. “Treating outside the doors of bankruptcy gives parties significant bankruptcy control that they do not have.”
Ford CEO Jim Hackett issued a statement: “As we did in the Great Recession, Ford is handling the coronavirus crisis in a way that protects our business. Array… We plan to emerge from this crisis as a more powerful company.
Meanwhile, Ford refused to talk about the main monetary points when asked at two of his recent meetings organized through major banks.
“Ford is in the last days of an interference mode: paying a credit card by credit card until the concert’s over,” market analyst Jon Gabrielsen said.
One of the country’s wisest bankruptcy lawyers, whose company has prevented him from being named because he works with the auto industry, said that “Ford’s really big losses are worrisome.”
Sad reality
Still, the franchise is not an option, said John McElroy, an industry observer and host of Autoline After Hours.
“Even though things are tough, you have to say, “We’re passing by to get out of this and be okay,” he said. “To pass out and say, “Dude, we have big problems, ” the money markets would go crazy. Suppliers would start to worry. Employees would be demoralized. It’s a real tightrope to say the fact without setting everyone on fire.”
However, recent loans have pointed to a grim reality.
“At the very beginning of the pandemic, when General Motors and Ford announced how much money they were going to borrow, it set off alarm bells in my mind,” McElroy said. “It was obvious they expected financial devastation in the marketplace and went to get money to carry them through. Now, just recently, we’ve seen Ford go back to the banks and ask them for another year before they have to pay that money back. So, clearly Ford believes the situation is worse now than what it thought three months ago.”
Keep hope alive
Sinister predictions about Ford are premature, Reid said.
“Ford’s record was consciously strong before the pandemic,” he said. “This money and liquidity, along with greater control and preservation of money and reduction of charges, are an explanation for why we can manage the crisis and invest strategically in Ford’s future.”
Ford’s worried, Reid said.
“We had monetary flexibility in 2008 and have intentionally controlled the balance sheet ever since so that we are ready for economic recessions, adding this one,” he said.
By Phoebe Wall Howard
Detroit Free Press
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