GM Bankruptcy Filing Could Hurt, Not Help, Ford

(MoneyWatch)  Today's bankruptcy filing by General Motors is also a critical stress test for rival Ford.

Will GM's bankruptcy help Ford, or will GM and Chrysler drag Ford down with them? I think that in the short term, GM's bankruptcy will hurt demand for autos in general, and that will hurt Ford, too.

Bankruptcy for GM and Chrysler could cut both ways. Ford's preferred scenario, of course, is that bankruptcy for GM and Chrysler will drive customers to Ford, as the only one of the Detroit Big Three that hasn't gone bankrupt. That could be true in the long run.

But it's also plausible that in the short run, GM's bankruptcy will depress demand more than ever. U.S. auto sales this year and next are already expected to be the worst since the 1970s, so any worsening could be a critical issue for Ford.

So far this year, the drop in demand has hurt everybody, not just the U.S. domestic automakers. U.S. sales are way down for Honda, Nissan and Toyota, too.

That means even if buyers turn away from GM because it has gone bankrupt, that doesn't necessarily mean they will turn to Ford. Recent experience shows that many consumers will continue to sit on their wallets and refrain from buying any vehicle, foreign or domestic, car or truck, fuel-efficient or gas guzzler.

Not only that, Chrysler, Ford and GM share many of the same suppliers. Ford President and CEO Alan Mulally said in December 2008 that there is 80 percent overlap among suppliers for the Detroit Big Three.

Just last week, one of Ford's biggest suppliers, Visteon, went bankrupt. Ford has agreed to help finance Visteon through the bankruptcy process to make sure its flow of parts doesn't get interrupted. But GM's bankruptcy filing could drag more suppliers into bankruptcy, which potentially could also hurt Ford.

Overall, while Ford may get some grim satisfaction from seeing its oldest rivals in bankruptcy, don't expect much in the way of overt celebration at Ford World Headquarters in Dearborn, Mich. ?€" for good reason.

Photo: Ford