As auto giants General Motors and Chrysler struggle to avoid bankruptcy, Ford announced today that it can make it through the year on the $21.3 billion in cash it currently has and that it does not plan to seek federal aid, unlike its two domestic rivals.
That hardly means that Ford isn't facing obstacles. The company posted a net loss of $1.4 billion over the first quarter, $2.3 billion worse than the profit it made in the same period a year earlier. Even so, that's better than analysts had expected. "Despite the challenges, Ford made strong progress on our transformation plan," a statement from Ford's chief executive, Alan Mulally, said. Ford has taken several major steps in an attempt to get out of the red, such as changing its collective bargaining agreement with the United Auto Workers to slash domestic labor costs by $500 million. The company also reduced its structural costs by $1.9 billion.
Ford's domestic rivals are faring far worse. Chrysler and General Motors submitted viability plans earlier this year in order to qualify for more funding from the government, but both plans were rejected. "After careful analysis, we have determined that neither goes far enough to warrant the substantial new investments that these companies are requesting," President Obama announced at the end of March. Instead, Chrysler and GM were given more time to negotiate with their stakeholders to come up with business plans that would "justify an investment of additional tax dollars," Obama said.
Chrysler is hoping for up to $6 billion in aid on top of the $4 billion it has received. But as it comes up on the April 30 deadline for a new business plan, some insiders reportedly have said that the Treasury Department has told Chrysler to prepare to file for bankruptcy as early as next week. Meanwhile, General Motors, currently propped up by $13.4 billion in federal loans, said yesterday that it will temporarily close 13 assembly plants in North America this summer. The closures, which will last for up to 11 weeks, will affect almost 24,000 workers and thousands of suppliers and local businesses. Sales at General Motors fell 49 percent in the first quarter.