How desperate were the Domestic Three automakers in the worst of times?
The federal government wouldn’t even buy Chrysler from the hedge fund Cerberus for $1! GM couldn’t even say what its cash position was but knew its debt load was unsustainable. Pulling the trigger on bankruptcy was just too tough a call for the proud and nor former CEO. Ford mortgaged quite literally everything and the kitchen sink. That included the legendary Ford Blue oval logo. Everyone held on for dear life, made the tough calls, like Ford bringing in a new CEO, Alan Mulally from Boeing and forging ahead without government loans. GM and Chrysler dealt with bankruptcy. All of us in Metro Detroit tried not to get splashed with the mud, but couldn’t avoid the mess.
So how proud a day was it today then as we fast forward to the happy ending? The man whose name is that Blue Oval, William Clay Ford Jr., announced he was able to get the company logo back! Yes, it’s is official, Ford is out of the woods. Consider that William Clay Ford Jr. made the toughest of tough calls to step aside as CEO knowing the turn around was beyond him. He was able to convince a highly skeptical Boeing V.P. to leave his comfortable perch and implement a turn around plan that will get the once over in global business schools for generations to come. Ford knew his company was in desperate trouble. While bringing in Mulally he green-lighted taking out a $23.5 Billion [yes with a B] loan; using all the company’s earthly assets and a few you couldn’t see that allowed it to survive the worst of the auto meltdown.
After considering that history, boy was it a relief when today Moody’s Investor Service hiked Ford’s debt rating from Ba2 to Baa3. That takes Ford bonds out of the “junk” realm and puts them back into the investment grade arena. That means the company can get back all the collateral it put up for its monster home equity line of credit. It also can breathe a little easier without the cash choking demands of paying higher yields to bond holders who needed a premium to invest in “junk.”
Now Ford can use that extra cash for revamping its car and truck line up, come in a little stronger and bring more resources to designing still better cars than the ones that are in some areas leading the global industry in quality. I asked William Clay Ford Jr. how personally gratifying it was to be here in this moment [while standing among hundreds of Ford employees]. He smiled and said “Come on!” as his employees heartily cheered.
Need he say more?
Back in the “olden” days when families did not take out home equity loans and paid off their 30 year mortgage in 30 years, families used to hold quaint little mortgage burning ceremonies. The Mortgage note would burn in an ash tray on the kitchen table or some other suitable location. This was a celebration usually followed by a dinner out or party of some stripe. We’ve gotten away from that glee filled touchstone. My parents did their ceremony long after I’d left the house so I couldn’t participate; but it was a cathartic happy event they had long looked forward to having. Looking at William Clay Ford Jr. today standing among roughly one thousand employees wearing blue Ford t-shirts, standing in the shape of a Blue Oval, they were holding their own mortgage burning ceremony. I could only imagine the joy, the happiness, the sense of accomplishment to earn the right to say such a crushing burden is now removed from their collective shoulders.
They all rightfully and genuinely enjoyed their catharsis. Ford, the man, stood smiling and triumphant as if he had just won a major election and why wouldn’t he? I had the feeling Ford, the company, savored this event while at the same time thinking there is no forgetting the joy or, for that matter, the sadness that brought this day on. It is a new day in the auto industry, and we are all the better for it. Congratulations Bill Ford and company.