Ford's Sentiment Tells All

Of the big 3, Ford is said to be the most solvent. Does Ford want its weaker competitors to fail or survive?

In many industries, each producer fantasizes that some of his competitors would go out of business. With their failure, the surviving producers can raise prices, cheaply acquire assets for expansion, and negotiate better deals with firms that supply inputs to the industry.

Notably, Ford has (apparently) not aspired for failures by GM or Chrysler and the aforementioned advantages that would accrue from their failures. Ford has actively participated in the lobbying efforts and -- aside from sending their CEO on the first DC trip in a private jet -- have missed many opportunities to sabotage the bailout.

This fact tells us a lot about the bailout's impact. Ford must believe that a bailed out GM and Chrysler would charge higher prices than would the manufacturer(s) who would serve GM and Chrysler customers after they failed. It's easy to see why Ford might believe this: a GM or Chrysler failure would break union contracts with those two manufacturers. Ford would still be tied to its contract as long it remained solvent, and thus would find itself competing with unionless manufacturers. Ford would benefit by a bailout of its competitors because the bailout would prevent its competitors from reducing costs.

If the Bush administration were loyal to the consumer, it would have asked Ford what kind of bailout Ford wanted for GM and Chrysler -- then did the opposite! In fact, the Bush administration did pretty much what Ford wanted, and thereby revealed its loyalties.