Ford in best shape of Big Three

DEARBORN, Mich. — A decision Ford Motor Co. CEO Alan Mulally made during his first months on the job might just save the automaker.

In 2006, the chief executive fresh from Boeing Co. wanted to concentrate on smaller, more fuel-efficient cars, matching production with consumer demand, and focusing on the Ford, Lincoln and Mercury brands.

The company has announced the closing of 17 factories and eliminated 50,000 jobs since its latest restructuring started in 2005, many through buyout and early retirement offers. It sold non-Ford brands Jaguar, Land Rover and Aston Martin and is considering the sale of Sweden's Volvo. Smaller cars produced by its European unit are coming to the United States starting in 2010.

But to fulfill his vision, Mulally needed at least $17 billion. He took his plan — one very similar to the one Ford submitted to Congress last week — to 40 banks at a time when credit flowed freely, and he ended up raising $23.5 billion. He bet all of Ford's buildings, stock, intellectual property, stakes in foreign automakers, and even its trademark blue logo as collateral.

"At the time people were wondering if we were being too aggressive to leverage assets," Mulally said.

The move to secure credit proved to be key to Ford's assertion that it doesn't need an emergency loan from Congress now as do General Motors Corp. and Chrysler LLC.

Ford had $18.9 billion in cash on hand on Sept. 30 and still had $12.3 billion of its credit lines left, but its ability to maintain operations through 2009 without government aid is key — because Ford could be standing on a melting iceberg. The company spent $7.7 billion more than it took in during the third quarter as U.S. auto sales fell, reaching an annualized sales rate of 10 million in November, the lowest level since October 1982.

Should industrywide U.S. auto sales drop to new lows in 2009, Ford says it would need to come to the government for help. In the plan it submitted to Congress last week, it asked for access to a $9 billion line of credit just in case.

Ford never thought the credit it lined up would be needed to run basic operations, at least not before car sales plummeted this year.

"None of us thought it would go as deep as it was going to go and we would have to use it all," Mulally said.

If GM, Chrysler or both declare bankruptcy, it could drag down parts suppliers and force Ford into the same situation, Mulally said. Any long-term gains in market share would be overshadowed by short-term pain in a disrupted supply chain, and negative customer perception.