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Will Ford Benefit From Federal Contracts Given Government Stakes in GM, Chrysler?

The myriad issues and conflicts posed by even partial government ownership of General Motors are formidable and ponderous by most accounts. So you have to wonder what happens to the significant number of government contracts awarded to GM and Chrysler under current bailout plans.

For fiscal year 2009 through mid-April, GM has been awarded $522 million in federal contracts, 96 percent of them competitively bid. Add in the $361 million in fed contracts going to Chrysler and it starts to add up to some real money.

The government cannot bid competitively with entities that it partially owns, and under GM's most recent restructuring plan, the feds would hold more than 50 percent of the automaker's stock in exchange for forgiving $10 billion in government loans. If Chrysler's bankruptcy continues as planned, the government would hold an eight percent stake.

The last transaction recorded between the General Services Administration and Chrysler -- a relatively small $23,000 contract for a "police use car" -- was on April 8 and had a field of four bidders. Many of GM's bid awards are similar. When the field is winnowed -- the government still needs these vehicles -- it could well mean that Ford stands to bolster its standing in such procurement decisions.

Even experts are wondering how this will shake out. Does it mean GM and Chrysler will be out millions of dollars in government contract dough that they have counted on for years?

"I can't even think of what the answer to this might be," said Joe Flynn, President of the Association of Procurement Technical Assistance Centers in Gallatin, Tenn. "This is something that will have to be dealt with, and soon."

President Obama has stated emphatically that he has no plans to create what some critics have dubbed Government Motors: "I don't want to run auto companies, I don't want to run banks. I've got two wars I've got to run already.... The sooner we can get out of that business, the better we're going to be," he said.

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