Friends and fellows, you have before you an example of how our current kleptocracy works and why corporatism will fail to bring you any green cars or loan paybacks from bailout queens. The example is a comparison between recent news from Government Motors (GM) and Ford Motor Co.
Last year, General Motors was the recipient of around $52 billion in bailouts and special concessions from the federal government, went through bankruptcy restructuring (in which it screwed its secured debtors and paid handsomly to the non-secured debtors who had better political connections) and emerged amidst heavy marketing and propagandizing to restore its name (such as it was) on the market.
At the same time, Ford Motor Company smelt a rat and stepped away from the bailout hearings, refusing government handouts. It proceeded with a painful, but bold plan to restore itself financially and return itself to profitable operations using its own ingenuity and guts.
In the past week, GM has announced that it “paid off its government loans” amidst much fanfare and commercialization. Of course, as I pointed out then, the announcement was a half-truth cloaked in political shenanigans. The amount paid back was a pittance compared to the actual. Moreover, new evidence has since emerged showing how the loan was “repaid” using more government loans. As Tom Blumer at Newsbusters points out, the $8 billion ($6.4 billion of which was paid to the USG) GM “paid back” to the government came from their $13.4 billion “escrow aid money” set up for them by the government during GM’s bankruptcy. In other words, GM just paid it’s VISA card debt using a MasterCard. Sound financials there…
Meanwhile, Ford just announced (rather quietly) to its shareholders that it has reached profitability a year ahead of schedule. This first quarter of 2010, Ford has shown a $4 billion improvement from last year at the same time and this posts their highest pre-tax operating profit in six years. Ford projects that they will show solid automotive operating-related cash flow this year. In other words,points out Edmunds, they’re in the black again and a year ahead of schedule.
Their highest-selling vehicle is still the F-150 pickup truck, followed by the mid-sized Fusion, the tiny Focus, and then the Escape SUV. Of those models, two are available as hybrids (one the most fuel-efficient hybrid on the road today), one as a CNG or diesel, and one will be available as a hybrid next year.
Versus Government Motors, which has one hybrid that isn’t available yet, but will be soon. And that’s it.
That, friends, is the difference between a company that lived on credit and crashed (or should have) when the credit dried up as the economy went sour and a dynamic company responding to the market and tightening its belt during hard times.
Chrysler (the other bailout queen), meanwhile, is nowhere to be seen in all of this and is probably dead in the water, just waiting to finally sink and get it over with.