SHOPSMART AUTOS CUSTOMER INFORMATION – OCTOBER 2, 2021 –(PT.1)
Ford took $6B government loan in 2009 — and debt still haunts company
More than a decade after the last economic crisis, Ford Motor Company is still paying down a fat government loan created by Congress at the start of the Great Recession to aid automakers with factory projects. Critics at the time focused on General Motors and Chrysler, each declaring bankruptcy and accepting government bailout loans through the U.S. Treasury Department’s Troubled Asset Relief Program (TARP) to reorganize during the auto crisis that hammered the industry between 2008 and 2010. Meanwhile, Ford took a different path. But in the end, it accepted a government loan, too. The debt remains on Ford books today as the company navigates a pandemic. In September 2009, Ford entered into an agreement with the Department of Energy and borrowed $5.9 billion as part of a loan program created to finance automotive projects designed to help vehicles built in the U.S. meet higher mileage requirements and lessen U.S. dependence on foreign oil. The company is one of three auto recipients currently listed on the Advanced Technology Vehicles Manufacturing (ATVM) loan program site. While critics of government assistance, including Ford executives, still focus on the government bailouts, few have mentioned in recent years the loan program that handed out money during the same time period explicitly to shore up automakers. Then-CEO Alan Mulally is praised for having the foresight to mortgage everything just prior to that crisis, including the Blue Oval, because Ford was in trouble before anyone else and took action before anyone else. Ford, Nissan and Tesla are listed as loan recipients of a program that had strict financial solvency requirements to qualify. Nissan was awarded $1.6 billion for its Tennessee operations.Tesla garnered $465 million for California operations Both Tesla and Nissan had fully repaid their loans as of September 2017, according to CNBC. Ford had not. While Tesla stock surges, Ford is furiously working to shore up its financials. The loan plus interest creates an additional burden for Ford as cash supplies shrink. “As of December 31, 2019, an aggregate $1.5 billion was outstanding,” Ford disclosed in its most recent 10-K filing with the U.S. Securities and Exchange Commission. “The ATVM loan is repayable in quarterly installments of $148 million, which began in September 2012 and will end in June 2022.” Documents filed by Ford show the company owes payments of $591 million in 2020, $591 million in 2021 and $289 million in 2022. “They’ll have to come up with a way to pay, otherwise they’ll ultimately pay more for the privilege of borrowing,” said Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware. “This is the sort of thing that keeps people up at night. This is a 3 o’clock in the morning problem for the management team.”
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