OPINION:
The Ford Motor Company is proving that stories about the death of capitalism have been greatly exaggerated.
This week, Ford announced third-quarter net income rose 68 percent, and its domestic market share rose 2 percent over the previous September. In the worst economy since the Depression, the Michigan-based carmaker has earned a profit for six straight quarters. Ford passed Toyota to become the second largest auto brand sold in America. Meanwhile, General Motors’ market share declined 2.8 percent over the same period, and Ford is poised to surpass GM to become the best-selling domestic car brand. Most importantly, Ford has achieved this turnaround without the “benevolent” guiding hand of the Obama administration.
In February 2009, Ford was the only one of the Big Three American auto giants to turn down federal bailout money. At the time, we noted that this would establish an ideal test case, pitting GM and Chrysler - the wards of the state - against family-run Ford representing private enterprise. Twenty-one months later, Ford is pumping out exciting new models, matching the Japanese in quality, expanding its market, decreasing its debt and creating jobs.
Historic rival General Motors, on the other hand, took a $50 billion bailout from Uncle Sam, after which Mr. Obama fired CEO Rick Wagoner, hand-picked new members for the GM board of directors and personally “laid out a framework for General Motors to achieve viability.” Government Motors, however, has gone through four CEOs in 18 months, continues to lose market share, is crafting its new brand identity around a half-baked electric car, is lagging behind the competition in quality surveys and has failed to achieve sustained profitability.
Those who bought Ford stock in February 2009 are happy they did. The stock closed that day at $1.58, and as of this writing it’s at $14.41. General Motors stock went down 74 percent between February and the end of May 2009, when trading was suspended and GM declared the biggest industrial insolvency in U.S. history. GM stock reemerged under the humiliating name “Motors Liquidation Co.” and peaked at 93 cents in August 2009. It now trades for 27 cents.
The new GM is planning to hold an initial public offering (IPO) next month, which technical analysts initially expected to be priced around $110 per share but which has been downgraded to around 20 bucks. The government would like a higher price per share since it’s a 61 percent stakeholder in the company and because a high stock price would seem to validate the wisdom of Mr. Obama’s takeover. While the feds could compel an offering at an unrealistic initial stock price, the bureaucratic leviathan thankfully cannot (yet) force anyone to buy it.
When General Motors declared bankruptcy in the summer of 2009, Mr. Obama preached that the country had to make sacrifices “so that your children and all of our children can grow up in an America that still makes things.” Ford Motor Company is proving to Mr. Obama that his amateur efforts really aren’t needed for American industry to prosper. All that is required for business to flourish is to have well-run companies making quality products that people want to buy. All the government has to do in this scenario is get out of the way.
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