Friday, January 15, 2010

Government Vs. Private Sector Showdown

Private sector wins again:

For decades, General Motors, Chrysler and Ford have been notoriously lumped together at Detroit's Big Three but these days Ford is distancing itself from the pack. But the reality is the separation began a few years ago when former Boeing executive Alan Mulally took control of Ford. "Alan Mulally came in 2006 and said, 'This idea of producing vehicles that people don't want to buy and forcing them into the market is insanity…By doing that he got a head start on everybody else," AutoNation Inc Chief Executive Mike Jackson said in a recent interviewwith Reuters.

Despite reporting record losses of $14.6 billion in 2008, Ford refused to take auto bailout cash and avoided bankruptcy and 2009 indicated that automaker is successfully turning the corner. Ford's stock "gained 55 percent since November and more than quadrupled over the past year." The company began January "by posting its first annual gain in U.S. market share since 1995 and the best sales growth in December among its peers." What turned it around?

"Under Mulally, Ford has slashed its North American workforce in half, closed factories and converted plants from making sport-utility vehicles to building smaller autos like the Focus. He sold Jaguar, Land Rover and Aston Martin and is near a sale of Volvo to China's Zhejiang Geely Holding Group Co.

"I would like to be remembered for contributing to refocusing Ford on Ford," Mulally said, adding he has no plans to retire. Mulally said he considers his "defining moment" at Ford his appearance before congressional committees in late 2008, where lawmakers derided him and his fellow U.S. auto chiefs for flying in private jets to Washington to beg for a bailout.

"This is a very personal issue for me because I was the one there, doing it," Mulally said. Americans "want companies to be successful. We don't want to nationalize companies."

And while Chrysler and GM are working to reinstate unprofitable dealerships, Ford is seeking to consolidate. "The dealers are excited, because they all want the same thing. They want to be profitable while growing sales," said Mulally.

Chrysler says it sees light at the end of the tunnel, but Chrysler won't reach the end of the tunnel until summer. The automaker said the company's sales won't improve until June. While both Chrysler and GM reported sales declines in December, Ford's sales rose 33.5%.

If the 2010 Detroit auto show is any indicator for future sales, the trend of Ford rising with the other two faltering will likely continue. Ford stole the show not only with its impressive 54,000 square-foot display but also with cars people actually want to buy.

We can't lump Detroit's Big Three together anymore because right now Ford is in a class of its own while government motors shows no signs of returning to the private sector where it belongs.

And, apparently, if the American public has anything to say about it (which they do, through their purchasing dollars), Ford will stay head and shoulders above the Big Government Two.  I'm still expecting some additional environmental regulations of some kind that will greatly hamper Ford's ability to compete on a level playing field.  But, with all of the bog-downs in Obama's agenda, things like cap-n-trade are falling further and further behind schedule, so we may dodge that particular bullet from Congress.  Of course, the EPA has gone off its rocker all by itself, so the danger remains.

But, as predicted, Ford is a real world example of how the private sector does a far better job of meeting the needs of people and doing it more profitably than anything the government can hope to achieve.  Go figure!

There's my two cents.

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