Ford and government help

K.E. Campbell
A Ford Motor Company commercial heralding the company's non-bailout bona fides has generated some Internet and talk-radio buzz in recent days (here, here, and here for example). Rush Limbaugh broadcast the commercial's audio and commented on it on Friday. In the ad, a Ford customer, taking questions from faux reporters, says:

I wasn't going to buy another car that was bailed out by our government. I was going to buy from a manufacturer that's standing on their own: win, lose, or draw. That's what America is about is taking the chance to succeed and understanding when you fail that you gotta' pick yourself up and go back to work. Ford is that company for me.

But did Ford really stand on its own? Though Ford spurned the form and extent of government assistance accepted by GM and Chrysler, Ford did enter into a $5.9 billion loan arrangement with the same governmental entity that gave a $535 million loan guarantee to now-defunct Solyndra. Also, Ford lobbied Uncle Sam "for assistance to its competitors, arguing that a collapse of either GM or Chrysler could put its suppliers out of business and create a domino effect."

Ford's below-market loan arrangement was made in September 2009 through the Department of Energy Loan Programs Office. A DOE webpage touting the loan states the funds were to be used for DOE-approved purposes to upgrade Ford factories in five states and "to introduce new technologies that will raise the fuel efficiency of more than a dozen popular vehicles." According to the DOE, "the project will convert nearly 33,000 employees to green manufacturing jobs." Though analysts have questioned the 33,000 employee claim, that amount equals "about half of the Detroit automaker's entire hourly and salaried U.S. workforce," according to the Washington Post.

As of December 31, 2010, Ford had $2.8 billion outstanding under the DOE loan facility.

Specifically, the Ford loan was initiated under the DOE's Advanced Technology Vehicles Manufacturing incentive program (in its corporate literature, Ford mistakenly calls it the Alternative Technology Vehicle Manufacturer program). The loan disbursements are made by and through the Federal Financing Bank. The little-known FFB was created in 1973 and is under the supervision of the U.S. Treasury. As of June 2011, FFB "holdings of obligations issued, sold or guaranteed by other Federal agencies totaled $55.4 billion." A list of disbursements made by FFB in June 2011 alone, including $391 million to Ford and $2.4 million to Solyndra, is shown here.

Interestingly, as described in the Washington Times, the beleaguered U.S. Postal Service -- in a similar vein as the Ford commercial -- claims it doesn't receive taxpayer funding, yet the USPS is "nearing its borrowing limit of up to $15 billion" from FFB.

Despite the Solyndra debacle, the Obama administration "is moving to finalize as many as 15 loan guarantees for renewable energy companies," according to Fox News, before a certain stimulus program for "green energy" companies ends on September 30.

If DOE-guaranteed loans aren't repaid, taxpayers foot the bill, but that's not the only downside of federal-government financing of private businesses, as I've written about previously. Companies that don't tow the Administration line, that don't employ favored constituent groups, or are headed by outspoken CEOs (like Steve Wynn) would probably have their loan applications treated differently than was Ford's. And as economist John Tamny writes in his most recent column, "once an institution is the recipient of government largesse" it must serve its "political masters" who will seek "payback in the form of coerced business activity that has nothing to do with profit." 

A Ford Motor Company commercial heralding the company's non-bailout bona fides has generated some Internet and talk-radio buzz in recent days (here, here, and here for example). Rush Limbaugh broadcast the commercial's audio and commented on it on Friday. In the ad, a Ford customer, taking questions from faux reporters, says:

I wasn't going to buy another car that was bailed out by our government. I was going to buy from a manufacturer that's standing on their own: win, lose, or draw. That's what America is about is taking the chance to succeed and understanding when you fail that you gotta' pick yourself up and go back to work. Ford is that company for me.

But did Ford really stand on its own? Though Ford spurned the form and extent of government assistance accepted by GM and Chrysler, Ford did enter into a $5.9 billion loan arrangement with the same governmental entity that gave a $535 million loan guarantee to now-defunct Solyndra. Also, Ford lobbied Uncle Sam "for assistance to its competitors, arguing that a collapse of either GM or Chrysler could put its suppliers out of business and create a domino effect."

Ford's below-market loan arrangement was made in September 2009 through the Department of Energy Loan Programs Office. A DOE webpage touting the loan states the funds were to be used for DOE-approved purposes to upgrade Ford factories in five states and "to introduce new technologies that will raise the fuel efficiency of more than a dozen popular vehicles." According to the DOE, "the project will convert nearly 33,000 employees to green manufacturing jobs." Though analysts have questioned the 33,000 employee claim, that amount equals "about half of the Detroit automaker's entire hourly and salaried U.S. workforce," according to the Washington Post.

As of December 31, 2010, Ford had $2.8 billion outstanding under the DOE loan facility.

Specifically, the Ford loan was initiated under the DOE's Advanced Technology Vehicles Manufacturing incentive program (in its corporate literature, Ford mistakenly calls it the Alternative Technology Vehicle Manufacturer program). The loan disbursements are made by and through the Federal Financing Bank. The little-known FFB was created in 1973 and is under the supervision of the U.S. Treasury. As of June 2011, FFB "holdings of obligations issued, sold or guaranteed by other Federal agencies totaled $55.4 billion." A list of disbursements made by FFB in June 2011 alone, including $391 million to Ford and $2.4 million to Solyndra, is shown here.

Interestingly, as described in the Washington Times, the beleaguered U.S. Postal Service -- in a similar vein as the Ford commercial -- claims it doesn't receive taxpayer funding, yet the USPS is "nearing its borrowing limit of up to $15 billion" from FFB.

Despite the Solyndra debacle, the Obama administration "is moving to finalize as many as 15 loan guarantees for renewable energy companies," according to Fox News, before a certain stimulus program for "green energy" companies ends on September 30.

If DOE-guaranteed loans aren't repaid, taxpayers foot the bill, but that's not the only downside of federal-government financing of private businesses, as I've written about previously. Companies that don't tow the Administration line, that don't employ favored constituent groups, or are headed by outspoken CEOs (like Steve Wynn) would probably have their loan applications treated differently than was Ford's. And as economist John Tamny writes in his most recent column, "once an institution is the recipient of government largesse" it must serve its "political masters" who will seek "payback in the form of coerced business activity that has nothing to do with profit."