American Icon (56 page)

“This is really important,” GM’s CEO agreed. “Let’s get behind this. Let’s do this together.”

Nardelli was nodding. Mulally never got to finish his presentation.

This sudden change of heart made it clear to Mulally that his competitors were desperate for aid of any kind. If he had any doubts that GM and Chrysler were in real trouble, they were gone now.

F
or a Detroit automaker, Ford enjoyed a decent rapport with the administration of President George W. Bush. Two of the company’s top executives—General Counsel David Leitch and Vice President of Government and Community Relations Ziad Ojakli—had been respected White House staffers and maintained close connections with their former colleagues. But with two wars and an imploding housing bubble, Bush had little time for the automobile industry. That began to change in 2008. Administration officials were grateful for Ford’s insights into the state of the economy and supported the company’s effort to win funding for the Energy Department loans, but when and how to fund those loans was up to the Democrat-controlled Congress. However, there would soon be someone else in the White House, and Ford did its best to ensure that the next president was sympathetic to the automobile industry.

Senator Barack Obama certainly did not seem to be, at least not at first glance. During a speech to the Detroit Economic Club in May, he had delivered the typical Democratic critique of the industry.

“
For years, while foreign competitors were investing in more fuel-efficient technology for their vehicles, American automakers were spending their time investing in bigger, faster cars,” said the charismatic candidate. “And whenever an attempt was made to raise our fuel efficiency standards, the auto companies would lobby furiously against it, spending millions to prevent the very reform that could’ve saved their industry.”
^*

But Ojakli and his political operatives were hearing a lot about Obama’s willingness to listen to new ideas. On June 25, Mulally put that to the test. He and a small group of business leaders met with the senator from Illinois—now the presumptive Democratic nominee—in Chicago to discuss the state of the U.S. economy and their ideas for fixing it.
^†
Mulally did his best to convey the severity of the deepening
crisis that now threatened his company, telling Obama that the rising cost of capital and declining car and truck sales had brought the entire industry to “an inflection point.”

“What is really important?” Obama asked. “How can we help you contribute to the economy?”

Mulally talked about the need to restore liquidity to the credit markets and the importance of developing a national energy policy, one that included a single standard for fuel mileage and carbon dioxide emissions. At the time, California and a number of other states were preparing their own, more stringent mandates. Complying with these different standards would be difficult, time-consuming, and costly for an industry already at the breaking point. But Ford was not opposed to greener technologies. Mulally outlined ways the federal government could help spur the development of the advanced batteries needed for hybrid and electric vehicles. He also talked about the imbalance of trade with South Korea and the restrictions that nation put on U.S. automobile sales. And, of course, he talked about health care reform. Mulally explained how insurance costs widened Ford’s competitive gap with foreign automakers. He thought Obama was a good listener. The candidate was clearly working out the details of his agenda and was genuinely interested in hearing what Ford and other major corporations had to say.

Ford’s CEO had already had a similar meeting with Republican presidential candidate Senator John McCain when he visited Michigan in February.

As Mulally worked through official channels, the company’s executive chairman was working behind the scenes to put the plight of the American automobile industry on the agenda in this election. Bill Ford believed Barack Obama had a good shot at becoming the next president of the United States. He made his first call to the candidate back in December 2007, planting the seeds for a future dialogue. By the middle of 2008, it seemed like Ford’s hunch might be correct. When it became clear that Obama had clinched the Democratic
nomination, Bill Ford asked Joe Laymon to call in one more favor for him.

Though Laymon now worked for Chevron and lived in California, he still considered himself Ford’s guy, and he would do anything for his former boss. He picked up his cellphone and dialed Ron Gettelfinger’s number. The United Auto Workers still wielded plenty of power in the Democratic Party, and Laymon asked the union president to broker a face-to-face meeting between Bill Ford and Obama away from the cameras.

On August 4, the candidate’s plane landed in Lansing, Michigan. A black limousine was idling on the tarmac. When Obama got in, Bill Ford was waiting for him. On the way to his campaign speech at the Lansing Center, the two men talked about the state of the economy and the American automobile industry.

“Do you think you will need a bailout?” Obama asked Ford.

“No. I think we can get through this on our own. But I think GM and Chrysler could go bankrupt without one,” Ford said. “If that happens, they could bring down the whole industry—and the rest of the economy with it.”

Obama nodded.

Ford thought the meeting went well. Obama was receptive to his concerns, and the two men seemed to hit it off. Bill Ford was already a big donor to the Obama campaign. So were many of the other Ford heirs. Laymon, also a Democrat, urged Bill Ford to publicly endorse the candidate—not as a private citizen, but as the head of Ford Motor Company. If he did, Laymon believed it would be worth a cabinet appointment, something Ford had long coveted. Together, they began to put together a plan to invite Obama to the company’s advanced research-and-development lab in Dearborn, let him give a speech about green technology, and then publicly announce the automaker’s support for the Democratic candidate.

Ojakli argued against it. He told Bill Ford that it was a dangerous gamble to endorse any candidate. If Obama lost, Ford would have no chance of working with McCain. If he won and became unpopular, Ford would be tainted by its association with the new president. Mulally also opposed the move, as did David Leitch. Some in the
company accused them of only doing so because they were Republicans, but Ojakli told Ford his recommendation would be the same if he were contemplating a McCain endorsement.

“Either way,” he said, “you’re going to alienate half the voters.”

Ford decided Ojakli was right and decided not to pursue Laymon’s plan.

O
n August 15, Ojakli met with Keith Hennessey, director of the National Economic Council and one of President Bush’s most trusted advisers. They knew each other from the West Wing.

“Keith, let me just tell you what’s happening. We’re borrowing at rates approaching twenty percent,” Ojakli said. “If we’re in this position now, I can’t imagine where GM and Chrysler are. You’ve got a big problem.”

Hennessey agreed to see what he could do about the Energy Department loans.

In the weeks leading up to both parties’ national conventions, the newly aligned Detroit Three launched an aggressive grassroots campaign to convince Congress to fund the program as quickly as possible. They had dealers write letters to their representatives and asked suppliers to work their own connections. They hit both conventions hard, passing out literature and talking up delegates. Their message was clear: “The road to the White House goes through midwestern auto states.”

After securing the nomination of his party on August 28, Obama expressed his support for the loan program. He not only called for funding it, but also suggested doubling the amount authorized by the legislation from $25 billion to $50 billion. McCain, who became the Republican nominee on September 4, was less receptive. McCain had developed a deep disdain for the American automobile industry during his years as chairman of the Senate Commerce Committee, and he was not convinced the American taxpayers should be helping an industry that had done so little to help itself.

But after the collapse of Lehman a few days later, the Detroit Three were not the only ones pushing Congress to fund the Energy
Department program. Some of the biggest banks on Wall Street began quietly lobbying lawmakers on their behalf. They were heavily exposed, particularly with Ford, and wanted Washington to shore up their investments. The automakers kept up the pressure, too. On September 16, Bill Ford traveled to Washington to meet with the House of Representatives’ automotive caucus. It was a standing-room-only gathering in one of the side chambers off the House floor that including more than twenty members of Congress, along with numerous aides and advisers. Ford explained why his company needed access to the loans and needed it now. Lawmakers from states with Ford factories began pressuring McCain to throw his weight behind the Energy Department program, too. He finally relented.

With the support of both presidential nominees, Congress finally approved funding for the $25 billion loan program on September 29. But it would be nine more months before any of that money was actually allocated to an automaker.

E
ver since General Motors netted some $14 billion by selling a majority stake in its finance company to Cerberus Capital Management back in 2006, Ford had been under constant pressure from Wall Street to do the same with its lending arm. But Bill Ford and Alan Mulally were convinced that Ford Credit’s real value lay in its ability to support the sale of the automaker’s cars and trucks. Now, with the global credit markets dried up, Ford’s strategy looked downright prescient. In the wake of Lehman, banks began abandoning the automobile industry. Customers—even those with good credit—could not get loans or leases. Dealers could not get the financing they needed to cover their inventory. This began to have a real impact on Ford’s competitors. But since Ford still owned its own finance company, it could continue to provide credit to dealers and customers alike—as long as it still had money to lend.

But by the end of September, keeping Ford Credit funded was becoming nearly impossible. Mulally appealed to Bernanke and Paulson, asking them to do whatever they could to restore liquidity to the credit markets. Ford also sent Neil Schloss—who had been promoted
to treasurer back in 2007—to Washington to see what he could shake loose. Schloss was surprised to find receptive audiences at both the Federal Reserve and the Treasury Department. The nation’s central bank was preparing two important programs designed to provide credit to companies of all types.
^*

The first, known as the Commercial Paper Funding Facility, allowed businesses to borrow money from the Federal Reserve using secured or unsecured commercial paper as collateral. When it began accepting applications on October 20, Ford Credit was one of the first in line. Ford’s finance company signed up to sell as much as $16 billion worth of asset-backed short-term notes to the Fed.
^†

The second program, known as the Term Asset-Backed Securities Loan Facility, or TALF, was announced on November 25. It was designed to restore liquidity in the asset-backed securities market. The TALF program did not begin backing investments in securities until March 2009, but once it did, Ford was ready. Over the next twelve months, Ford Credit issued more than $12.5 billion in TALF-eligible bonds. Both foreign and domestic companies were eligible for TALF backing, and most of the Japanese and German automakers also issued TALF-eligible securities.