(AFP) – Oct 2, 2008
PARIS (AFP) — Government loans awarded to three major US automakers are justified as they need them to meet new environmental regulations, Ford chief executive Alan Mulally said Thursday.
"This is not about a bailout," the Ford chief executive told AFP in an interview at the Paris auto show.
"It was very insightful what they did with the recent credit tightening, otherwise it would have really slowed down all efforts to being new technology into fuel-efficient vehicles."
Critics have alleged the US firms received an unwarranted subsidy.
US President George W. Bush signed a new energy bill Tuesday after it received approval from Congress.
It includes a 25-billion-dollar (17.8-billion-euro) loan package to help Ford, General Motors and Chrysler adapt to new emissions regulations.
Mulally said the cost of meeting new regulations could be as much as 110 billion dollars.
The money will be used to retool and adapt factories to make smaller, more fuel-efficient cars. Mulally said the extra cash could also be used to develop cars that will be sold in Europe.
"When we make a 'global' car for the United States, they will also be vehicles that will be sold in Europe," he said.
The former Boeing chief executive rejected the argument that Ford had focused too heavily on larger, gas-guzzling vehicles and failed to anticipate the developing trend towards smaller cars.
"We weren't pushing these larger vehicles, we were just building what our customers wanted," Mulally said.
Although SUVs and larger cars are less fuel-efficient, they carry bigger profit margins that can significantly boost an automaker's bottom line.
This is because they can charge more for larger vehicles, better covering development costs.
The Ford chief executive said that the challenge for his company was to make sure that every vehicle in its lineup makes money.
While the three big US companies have requested government cash, Japanese automakers Nissan, Honda and Toyota have said they would not seek to access funds from the 25 billion dollar package.
Ford however badly needs the cash injection. In the second quarter of 2008, it posted a net loss of 8.7 billion dollars, down from a net profit of 750 million dollars for the same period in 2007.
Its Detroit rival GM lost 15.5 billion dollars in the second quarter of 2008, compared with a profit of 891 million in 2007.
Chrysler is now owned by private equity group Cerberus and is no longer obliged to make its results public.
Ford announced its latest US sales figures on October 1.
New car sales plunged 35 percent in September to 116,734 vehicles, down from 176,204 in September 2007. Sales for the year to date fell 17.3 per cent to 1.5 million vehicles.
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