Big 3’s heaviest debt load now falls on Ford Motor Company

Ford Motor vehicles

GM ready for market rivalry

Ford Motor Co. has benefited for months from the woes of its bailed-out Detroit brother General Motors Corp., but GM’s emergence from bankruptcy – freed from its heaviest debts – now puts debt-laden Ford at a disadvantage.

GM used the bankruptcy process and its federal bailout to shed more than $40 billion of past debts and other obligations, and now can operate more nimbly and profitably in the most competitive auto sales market in a generation.

But Ford still faces the steep cost of servicing its $32 billion of debt – nearly twice as much as GM’s and three times as much as Chrysler Group LLC’s – since GM and Chrysler emerged from bankruptcy. Moreover, Ford was not able to use bankruptcy to shed other burdens, such as a bloated dealer network and idle manufacturing plants, as its rivals did.

The companies now must compete in a market that has shrunk by more than a third from sales levels that prevailed a year ago. But GM estimates that it can now make a profit with annual U.S. auto sales of about 10 million, down from 16 million in 2007, while Ford would need to have higher sales on average to foot its higher debt costs and make a profit.

“Ford got bupkis for its financial virtue” by going deeply into debt to avoid a government bailout, said Antony Currie, an analyst at Breakingviews.com. Ford’s strategy helped it for a while to gain market share over its rivals, attracting buyers who are repelled by the government’s involvement with the other Detroit automakers.

But in the post-bankruptcy world, Ford now is saddled with obligations GM and Chrysler no longer have to bear, he said.