While much attention has been focused on the election results in Virginia and New Jersey last night, perhaps the bigger story is the election results announced in Michigan yesterday where Ford Motor Company announced a profit of almost $1 billion.* Ford, the lone of the Big Three Automakers to not accept government bailout money, is demonstrating that a private company, in the midst of a devastating recessionary environment in its industry, can find ways to make money. We suspect they are now making products people want to buy (like the beautiful red retro Mustang pictured), but also that consumers are standing behind the company that decided to "go it alone" and reject the government's offer of assistance.
We believe this is a signal to government that intrusion into the free enterprise system, and the cronyism that can result, is not acceptable to ordinary "car buying" citizens. It occurs to us that the success of Ford may have as much to do with voter/citizen backlash against the heavy hand of government as it does with their managing through a tough economic environment.
And while Ford is looking good right now with its breakout to profitability, storm clouds are hovering. Their counterparts over at the "U.S. Department of Automobiles" (GM and Chrysler, of course) are likely to be given preferential treatment when it comes to labor negotiations. This could spell trouble.
But perhaps Ford will have a trump card, as Economics Professor Dr. Mark Perry pointed out last December in his excellent Carpe Diem blog, Ford has built the most advanced auto production facility in the world...in Brazil! It would be a shame if the unreasonable position of the UAW (now aided by GM and Chrysler's new majority owner!) were to force Ford to abandon operations in the United States. However remote that possibility is, that may be what is in the future given Ford's obvious disadvantage in negotiating with the UAW.
As believers in the free enterprise system, while we would be disappointed to see such an event come to pass, we would support Ford wholeheartedly.
* The Principals of Taylor Frigon Capital Management do not own shares of Ford Motor Company.
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