WSJ:Treasury to Ford: Drop Dead
Wall Street JournalWhen the Bush Treasury decided to bail out Detroit, GM and Chrysler quickly said yes to the taxpayer cash, but Ford Motor Co. said it didn't need the money and declined. Ford's reward for this show of self-reliance? Treasury is now helping GM again by giving it a credit pricing advantage against Ford in the marketplace.
That's one little-noted result of Treasury's action earlier this week to rescue GMAC, the GM credit arm that, as it happens, is 51% owned by the Cerberus private-equity shop that also owns Chrysler. With $5 billion in taxpayer cash in its pocket, GMAC quickly decided to offer 0% financing on several of its models. "I think it would be fair to say that without this change . . . we would not be able to do this today," explained GM Vice President Mark LaNeve in a conference call with reporters this week.
GM said it will offer 0% financing for up to 60 months on the 2008 Chevrolet TrailBlazer, GMC Envoy and Saab 9-7X sport utility vehicles through GMAC. The Saab 9-3 and 9-5 sedans also qualify for 0% financing. The car maker is also offering financing between 0.9% and 5.9% on more than three dozen other 2008 and 2009 models, including many trucks and SUVs. The deal runs through January 5, and no doubt GM is hoping for a booming sales weekend.
The messy little policy issue is that these GM products compete with those sold by Ford, Toyota, Honda and numerous other car makers that won't benefit from GMAC's cash infusion. And with the cost of financing often crucial to buyer decisions, the feds have now put the muscle of the state behind one company's products.
Ford in particular must wonder what it did to deserve this slap. CEO Alan Mulally joined the GM and Chrysler chiefs in testifying for the bailout even while insisting his company didn't want the funds. And once the bailout was announced, Mr. Mulally said that "All of us at Ford appreciate the prudent step the Administration has taken to address the near-term liquidity issues of GM and Chrysler." So much for gratitude.
Ford -- and for that matter Honda and Nissan and most others -- makes cars with American workers. President Bush justified the auto bailout in the name of saving jobs, but apparently GM's jobs are more valuable than others. And with the taxpayers now having a stake in GM and Chrysler success, the Washington temptation will be to take other steps to help the two companies gain market share at the expense of their private competitors. Never mind that Ford is still struggling and Toyota recently posted its first full-year loss in 70 years.
This is always what happens when politicians decide to muck around in private industry. Even when made with the best intentions, their policy decisions have unintended consequences that help some companies at the expense of others. Meanwhile, your neighbor who buys a GM SUV this weekend with 0% financing should thank you when he pulls into the driveway. He did it with your money.