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Ford Had a Better Idea: No Bailout

Ford Motor Company took everyone by “surprise” Nov. 2, when it announced nearly a billion dollars in profit for the third quarter of 2009. The company also said it would be “solidly profitable” by 2011.

CNN repeated the announcement on Nov. 3 “American Morning,” saying, “Turning now to the Big Three in Detroit, Chrysler extends its buyout offer to more than 20,000 employees while General Motors is still trying to restructure spending billions of bailout dollars, but Ford – which didn’t take any cash from Uncle Sam – is back in the green again, posting a profit of nearly $1 billion for the third quarter.”

The announcement was big news, but what should have caught more journalists’ attention was the fact that Ford managed to turn things around without the help of a federal bailout – the very bailout reporters promoted in 2008 and 2009.

Yet, several shows including all three networks’ morning programs, CBS “Evening News,” CNN’s “Anderson Cooper 360,” and MSNBC News Live all left out that crucial piece of information Nov. 2.

But that Nov. 2 report, the “Evening News” found room to include union complaints against Ford, quoting UAW’s Gary Walkowicz: “I think people are angry and fed up with concessions. We’ve dealt with concessions year after year for the last five years. I people – think people got to the point of saying, ‘Enough is enough that’s it.’”

One year ago, the network news media avidly supported a federal bailout for the Big Three U.S. auto companies and ignored union responsibility for lack of competitiveness.

“GM may not make it without help, and others may have to merge,” declared “Nightly News” anchor Brian Williams in November 2008. “If just one of the Big Three were to fail, an estimated two and a half million jobs might be lost.”

ABC correspondent Chris Bury suggested on Nov. 11, 2008 that it was a matter of fairness, after all, the banks had already been bailed out: “After riding to Wall Street’s rescue can the government just say no to American automakers that are bleeding cash by the billions.”

Between Nov. 1 and Nov. 18, 2008 the morning and evening shows of ABC, CBS and NBC aired 31 stories with a pro-bailout tone, which was almost three times as many positive stories as balanced stories – only 12. Only one story, on ABC’s “Good Morning America,” presented an overall anti-bailout tone.

According to Reuters, GM and Chrysler received “roughly $64 billion in direct aid” from the government. Since then both companies have struggled. Chrysler saw sales fall 30 percent in October 2009, while GM saw a slight “bump” in sales of 4.7 percent the same month.

The media promotion of an auto bailout did not reflect public opinion. Back then 49 percent of Americans were opposed to an auto industry bailout and 47 percent were in favor, according to Gallup.

But according to Rick Newman, chief business correspondent for U.S. News and World Report, anti-bailout sentiment might have been exactly what helped Ford rise to profitability.

“[T]hey’ve taken market share from GM and Chrysler. Clearly a lot of people who wanna buy a domestic car, but were disgusted by the auto bailouts went over to Ford,” Newman told CNN’s “American Morning” Nov. 3.

NBC “Nightly News” and “World News” also indicated Nov. 3 that Ford’s decision not to take the bailout improved the public’s perception of the company and “richly rewarded” them.

Cash for Clunkers gets credit, Mullaly rarely gets rebuttal

Nine network and cable mentions of Ford’s successful quarter all credited the government’s Cash for Clunkers (CARS) program, but 77 percent of those reports (seven of nine) didn’t include Ford’s rebuttal that the company would have seen third quarter profits even without the trade-in program.

CEO Alan Mullaly said that the company would “absolutely” have profited even without cash for clunkers. “It was a good stimulus,” Mulally told Automotive News after Ford announced a $997 million quarterly net profit. “But the real strength of the third quarter is based on the strength of our product line improving.”

Automotive News reported, “CFO Lewis Booth said the federal government’s clunkers rebate program didn’t lead to an increase in Ford’s third-quarter wholesale sales. Instead, Ford ran dealer stocks down.”

But broadcast and cable news gave credit to the CARS program anyway, keeping its theme of promoting the government giveaway.

In August 2009, all three broadcast networks lauded the program calling it “wildly popular,” “too successful” and a “victim of its own success.” The networks also cited proponents of CARS nearly three times as often as critics in stories citing experts.

The $1 billion trade-in scheme burned through its entire 14-week budget in one week’s time, prompting the Senate to allocate another $2 billion in taxpayer dollars. Still, networks heaped praise on the clunker program. CBS “Evening News” anchor Katie Couric teased on Aug. 3, “[S]ales reports out today show the Cash for Clunkers program gave U.S. automakers a much-needed jumpstart.”

Union Dues

One major problem facing all three domestic car companies is the auto unions and their legacy costs.

When the networks were busy promoting a bailout of the auto industry in 2008, reporters were also conveniently ignoring unions as one of the reasons the industry was in trouble. Union contracts have put U.S. manufacturers at a distinct disadvantage compared to foreign auto companies that build cars in the U.S. But out of 44 stories in November 2008, only 4 pointed out the union problem.

Instead of blaming the unions, reporters blamed the overall U.S. economy for slumping auto sales.

“With sales plunging 35 percent in October alone, the auto industry is reeling from the nation’s biggest financial crisis since the 1930s,” CNBC’s Trish Regan said on the Nov. 8 NBC “Nightly News.”

But Daniel Ikenson pointed out on the Cato Institute’s Web site that unions are probably more responsible for Detroit’s problems than the media’s scapegoat of a generally bad economy. Those foreign nameplate manufacturers that sell in the United States “face the same contracting demand for automobiles as does the Big Three,” Ikenson wrote. “The difference is that these [foreign] companies have a better track record of making products Americans want to consume and are not seeking federal assistance.”

 

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