Despite Relative Strength, Ford Faces Challenges

Ford Motor Co., which has managed to survive without getting billions of dollars in help from the federal government — and without heading to bankruptcy court — is in an odd situation these days.

Although its position could help Ford win over new customers, it could also put the automaker at a disadvantage when facing rivals GM and Chrysler.

Increased Competition

At Harold Zeigler Ford, a relatively small dealership in a rural part of western Michigan, Sales Manager Ted Holloway says people are beginning to take notice that Ford is the only Detroit carmaker surviving on its own.

"A customer will come in the door and say, 'We're going to look at a Ford because they didn't take any government money' and whatnot," he says. "And it's funny to hear, but it's true."

Holloway says so far he is hearing that from only a few customers — though a few customers can make a big difference for a small dealership.

Holloway says, however, he is also seeing increased competition, especially from Chrysler, whose dealers have been slashing prices in recent months to cut inventory. Chrysler dealers that are going out of business are cutting prices even lower. It's tough for Holloway to compete against that.

"If somebody's coming in solely on price, and price is the only thing that matters, you know what, there's a good chance they might wind up buying a Chrysler," he says.

And while dealers like Holloway have their own problems, Ford as a company has challenges, too.

Advantage GM, Chrysler

Ford is now up against two competitors that will have tens of billions of dollars of debt wiped out. Ford was able to avoid bankruptcy because it took out more than $23 billion in loans a few years ago. It has to pay those loans back; GM and Chrysler don't have the same burden.

GM and Chrysler also now share a financing division, GMAC, which got its own help from the government that could make it easier to finance new car deals. Ford doesn't have this advantage, either.

And talking about these challenges publicly is a bit tricky for Ford, because it supported the government's involvement at GM and Chrysler. Ford officials don't want to seem like they are complaining now.

"We understand that, you know, some of what's going on now has the potential to change the competitive dynamic," Ford spokesman Mark Truby says.

He says Ford supported the efforts to save GM and Chrysler because, ultimately, it was better for the economy and better for the chain of parts suppliers on which Ford depends. Now Ford just has to keep up with the changes going on across town.

"We're going to try to work with all the parties to ensure at the end of the day, Ford's not disadvantaged," Truby says. "Because we think, all things being equal, we can win with our products."

An Upper Hand For Ford?

Product development is one area where Ford may have the upper hand. GM and Chrysler have been forced to cut back on some projects while they work their way through bankruptcy. Independent auto analyst Erich Merkle says that gives Ford the advantage.

"I know that seems strange given all the money that the government's dumping into these companies," he says. "But at the end of the day, Ford has by far the strongest product pipeline, they certainly have momentum in their favor, and I think they will win a lot of consumers as they move through this, relative to GM and Chrysler."

Merkle says winning new customers may be enough to make up for all the other disadvantages Ford has compared with GM and Chrysler.

Ford seems to see the opportunity. On Tuesday, it announced it would increase production over the summer, while GM and Chrysler both plan to have many of their plants closed.

Dustin Dwyer reports for Michigan Radio.

Comments

 

Please keep your community civil. All comments must follow the NPR.org Community rules and terms of use, and will be moderated prior to posting. NPR reserves the right to use the comments we receive, in whole or in part, and to use the commenter's name and location, in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.

Support comes from: