Fox News has held up Ford as an example of a company capable of surviving on its own, that it did not need a government bailout. However, when Neil Cavuto got to talking with Ford CEO Alan Mulally a slightly different story emerged:
A reminder that Ford lobbied congress for the auto bailout, that even if they did not directly gain one of the bridge loans, the collapse of the industry itself would have toppled them regardless.
What is forgotten is that no industry works in isolation. Every company in an industry depends in part on its competition. In the case of the auto giants, they each share vendors for components, such as light bulbs, gaskets, motor components, etc. The reason why the auto companies can survive in part is due to the lower prices caused by the demand for these commodity components.
If two thirds of an industry vanishes overnight, as would have happened had GM and Chrysler gone under, those supporting companies would have had to jack up their prices, if the market would have allowed, which was doubtful in a recession. With no demand for the higher priced cars, Ford could easily have gone out of business. So even if Ford itself was not in financial straights, if its supply chain suddenly had a price shock, or dried up as companies folded under the pressure, it too would have collapsed.
A small reminder from those at the heart of the storm.
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