Image: Ford
Karen Bleier  /  AFP - Getty Images
Ford F-150 pickups are shown at a Ford dealership in Hudson, Wis. With GM and Chrysler in bankruptcy, Ford is seeing a positive impact on sales.
By contributor
updated 6/2/2009 8:16:43 AM ET 2009-06-02T12:16:43

With GM and Chrysler both now in bankruptcy, a relatively healthy Ford stands to benefit, even as its two struggling Detroit rivals gain the advantages of powerful government backing.

Unlike GM and Chrysler, Ford hasn’t taken any money from the government. Two years ago, Ford’s Chief Executive Alan Mulally mortgaged every conceivable asset owned by the automaker to the tune of $23 billion to finance its turnaround plan.

While industry observers enthuse about the salutary effects of “quick rinse” bankruptcy plans for General Motors and Chrysler, as if these companies are simply changing hair color, Ford seems to hold onto the quaint notion that insolvency is better avoided.

It’s a position that’s pushing customers into Ford showrooms by default, as it were, according to Jack Kain, owner of a Ford dealership in Versailles, Ky.

“We’ve had so many people come in who have never come into a Ford dealership before, who have told us they were so happy Ford wasn’t having to borrow money from the government,” said Kain.

These customers are coming from both domestic and foreign nameplates, he noted.

“We’ve never had so many foreign cars on our [used car] lot,” Kain said.

It’s a perspective echoed by Rik Paul, automotive editor for Consumer Reports.

“A lot of people are thinking of buying American because they want to do their bit for the economy, but they are turned off by the problems at GM and Chrysler,” he said.

In fact, 63 percent of consumers surveyed by AutoPacific reported concern about buying from Chrysler, and 54 percent worried about buying from GM, even before the company filed for bankruptcy Monday, according to Ed Kim, director of industry analysis for the consultancy. By contrast, only 13 percent of consumers expressed concern about buying from Ford, he added.

Consumer Reports found an even stronger aversion to insolvent carmakers, with 78 percent of those surveyed saying they were unlikely to buy from a manufacturer in bankruptcy and 64 percent saying they were very unlikely to do so.

Shoppers not only say they are more comfortable buying from a solvent car manufacturer, they are voting with their dollars and driving Ford sales upward while Chrysler and GM shoppers hesitate.

“May will mark the seventh month in the last eight that Ford has increased its retail market share,” said George Pipas, Ford spokesman for sales analysis and reporting. “That hasn’t happened since early '90s,” when the company’s sales were powered by the twin dynamos of Taurus and Explorer. “At the retail level, last month’s 13 percent share was a point higher than a year ago,” he added.

(Ford and rival carmakers were scheduled to release official sales figures for May Tuesday.)

Ford has significantly curtailed sales to daily rental fleets, a onetime mainstay, and now rental sales account for only about 10 percent of production, a volume that is on par with competitors like Toyota, Pipas said. In the past, fleet sales were substantially less profitable than retail sales, but the profit gap has nearly evaporated under the harsh reality of mountainous incentives on retail sales.

The reduced fleet sales improve residual values, making Ford cars more financially appealing, according to Pipas.

But what about later this year or next, when slimmed-down GM and Chrysler get back in the car game in earnest, and their trips through bankruptcy relieve them of substantial costs? Will Ford be disadvantaged, or will the company take the sales lead from GM and power away on the momentum it is now building?

Observers say most of the advantages still will lie with Ford, even after GM and Chrysler benefit from deeper cost cuts than Ford may be able to achieve without bankruptcy and White House intervention.

Ford enjoys greater consumer confidence, holds esteem for its aversion to government aid, is getting higher ratings for quality and reliability, and has an array of fresh products queued up for introduction in coming months, including a refreshed Taurus family car that is earning praise from those that drive it.

“In our assessments, Ford products have done very well in recent years,” said Paul of Consumer Reports. “Cars like the Ford Fusion, Mercury Milan and Lincoln MKZ are among the most reliable models on the road.”

GM and Chrysler will have potentially lower costs and easier access to loan money for dealers and customers because of federal support of their loan arms. 

Thanks to the government aid, the minimum FICO credit score to qualify for a loan has fallen to 621 from 700 for GM and Chrysler, said Paul Taylor, chief economist for that National Automobile Dealers Association.

“At 621 you include a lot of normal consumers who may have a slight hiccup some time in the last five years," he said. "That was an important change.”

But this small advantage will not offset Ford’s myriad advantages, Taylor insisted. “When you start listing these things, the list for Ford gets pretty long,” he said. “For GM and Chrysler it would be largely financial and is a much shorter list.”

Still, having the government’s assistance is a powerful advantage.

“They have the benefit of being streamlined by the government,” said Paul, referring to GM and Chrysler. “So they will be smaller, more agile, better able to compete. Ford is doing restructuring on its own, but it remains to be seen if they’ll be able to complete their own restructuring in a timely manner.”

“I’ve seen forecasts that put Ford ahead of GM [in sales] this year,” said Kim. “They may emerge as the top-selling domestic manufacturer,” he said. “It’s not impossible that could happen.”

A key reason that GM needs fewer dealers is that it has fewer brands than before, so now it can concentrate its marketing and support dollars on those remaining brands and dealers. 

Ford is not eliminating dealers, but because those dealers are for effectively only two brands, Ford and Lincoln/Mercury, which are always paired, its marketing money is already focused. 

“Ford really has just two dealership networks,” said Kim. “So they don’t have quite the dealer proliferation problem GM does.”

For its part, Ford says it’s not worried about being left disadvantaged by government action.

“I don’t think Washington has any notion to save two companies at the expense of one,” said Pipas. “I can assure you we’re not going to be uncompetitive.”

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