Ford Motor Company

On November 29, 2006, the new Ford CEO, Alan R. Mulally, made a surprise corporate decision by pitching to the U.S.’s biggest financial institutions and banks to financially support the company. The CEO was willing to offer Ford assets, including its logo, as a mortgage for billions of dollars, enabling the troubled automaker to address its financial problems and remain profitable. The economy was very healthy in 2006 when the decisions were made. Yet, Mr Mulally argued that the injection of the funds from the banks would enable the company to cushion itself from any unexpected events or financial recession. Following this appeal, Ford received loans worth $23.6 billion that would see the company survive the financial crisis that hit the economy later in 2008.

In 2008, the sales numbers of Ford’s main competitors, General Motors and Chrysler, took a deep, almost driving the companies to bankruptcy. The crisis forced the two companies to seek financial aid from the Federal Government for $17.4 billion to remain afloat and viable.

Given that Ford had foreseen the economic and financial risk. The fact that they borrowed the money way before the crisis happened put them in a position of independence, eliminated the need for desperate borrowing from the government, ensured that they had a strong balance sheet, and enabled them to survive the biggest financial crisis ever to hit the automobile market in the U.S. and across the world.

Mr Mulally, only 90 days old as the CEO of Ford, was prepared to make unprecedented transformational decisions, including restructuring, downsizing, selling off brands and refocusing Ford on small cars instead of sports, trucks and utility cars to attain efficiency, keeping the costs low and differentiate from the other competitors in the market, attract new customers and expand market share. By focusing on its core brand and fuel-efficiency vehicles, Ford avoided bankruptcy as the recession hit the auto market.

It is worth noting that the decision not to seek government assistance prevented Fordrt from the competition and avoided the control of government control administration, forcing G.M. and Chrysler to undertake significant concessions from the lenders, creditors and union workers to qualify for federal loans and assistance. Despite the support from the government, G.M. and Chrysler would later file and seek bankruptcy protection. On the other hand, Ford effectively negotiated with the United Automobile Workers for using the stock options to finance half of the retiree health care contributions. In 2009, Ford was also free to negotiate with creditors enabling them to reach an agreement to retire $9.9 billion of corporate debt, a huge amount of which they borrowed in 2006.

Generally, by refusing to borrow and take government money, Ford avoided the government’s supervision and regulation. Ford was able to prevent pressure from the public, the press and politicians who felt that they needed to provide oversight, given the support from the government. G.M. was not lucky as the government interference saw the CEO resign, and the company experienced a significant shakeup within its management board.