Ford vs. GM: The IPOs of a Changing America

auto car factoryWhile General Motors' (GM) stock issue has broken records to become the biggest IPO in American history, it has also drawn attention to how much the auto industry has changed in the last few decades.

Less than 60 years ago, on Jan. 17, 1956, Ford Motor (F) launched its IPO into an economy in which U.S. industrial might was the envy of the world and American cars represented the apex of the automotive pyramid. Today, as GM eases into its second go-around, the questionable future of industry and the shifting definition of "made in America" cast a dark shadow over the car company's public celebration.

Owning a Piece of Magic

When Ford went public, it was the largest IPO in history, and its release of 10.2 million shares yielded $660 million (in 1956 dollars). More than 260 firms were involved in the IPO, and according to historians Peter Collier and David Horowitz, who wrote The Fords: An American Epic, "People stood in line outside brokerage houses in 1956 to be able to buy Ford stock, thus owning a piece of the company which still had an almost magical quality for the average American."

It's likely that part of the draw lay in Henry Ford's adamant refusal to sell stock because control of the company's operations remained in the hands of the Ford family. However, the founder died in 1947, leaving his grandson, Henry Ford II, in charge. Under the younger Ford's leadership, the company launched the IPO, opening it's ownership -- and leadership -- to the rest of the world.

Not coincidentally, when the younger Ford stepped down from the drivers' seat at the company in 1979, he was replaced by Philip Caldwell, the first non-Ford to be CEO of the carmaker. In fact, it was 22 years before the next descendant of the founder worked his way up to the head office. In 2001, William Clay Ford Jr. was elected CEO.

Before the Edsel, Before the Pinto

But Ford stock's status as forbidden fruit explains only part of the company's appeal to investors. Collier and Horowitz's vision of private stockholders waiting in the snow to get their piece of Ford may be somewhat florid, but the public had a deep affection for the brand. This, after all, was before the disappointment of the Edsel, the debacle of the explosive Pinto and several decades of second-rate engineering and third-rate construction.

In 1956, Ford was still changing its models every year, and it was offering the kind of big, high-horsepower models that Americans loved. That season, in fact, the major innovation was the Thunderbird -- a massive 312-cubic inch, 225-horsepower V-8 engine that was optional in all models.

The company's commitment to its workers was also part of its mythos. Henry Ford's 1914 decision to pay his employees the princely sum of $5 per day made it possible for them to buy the cars they worked on -- a strategy that generated extreme loyalty among his workers and impressed much of the car-buying public. By 1956, Ford had survived a few run-ins with workers, but its reputation as a good place to work still held strong.

54 Years Later, a Different World

GM's new stock is going out into a much tougher market. Unlike Ford, which used the funds generated by its IPO to expand, GM's proceeds will be used to pay back some of its creditors, including the U.S. and Canadian governments, both of which helped bail out the ailing carmaker last year. While this might dull the sting of the "Government Motors" tag that GM was hit with during the 2009 government bailout, the automaker will likely still have to deal with resentment over what many pundits and politicians have claimed was an inappropriate government incursion into private business.

It also seems likely that GM faces a tough relationship with its workers. On the one hand, the automaker unions -- UAW and CAW -- now own a hefty percentage of the company, having traded much of their pensions for a share in the new GM. While this would appear likely to translate into a more comfortable relationship with factory workers, a side effect of GM's restructuring will be a new pay-and-benefit tier that will enable the carmaker to hire new employees for roughly half of what their predecessors made.

It remains to be seen if the automaker will follow the old Ford model of paying workers enough to buy the cars they made, or if line worker jobs at GM will earn too little to cover the cost of buying GM cars.

Japanese Makes Can Be More American Than American Cars

Another difference is that the "made in America" label no longer carries the cachet that it had in the mid-1950s. Over the past three decades, while Asian and European car companies have poured money into innovation, American manufacturers have been left behind with models that have often paled in comparison. Worse yet, shoddy construction -- which car manufacturers have often blamed on a need to cut corners in order to pay hefty union contracts -- have led to an American reputation for second-rate cars.

There's also the question of what "made in America" now means. U.S. carmakers have outsourced many of their components to other countries, Asian manufacturers have taken advantage of tax breaks to bring factories to America. As a result, the car with the most American-made parts is the Toyota Camry, and the second place is taken by the Honda Accord. In fact, the Chevy Malibu is the only GM car among the top 10 American-made models.

GM's plan for the future is promising: In addition to its less-costly worker contracts, the company has shed all but four of its brands in the hope of creating distinctive identities for its remaining models. With lower labor costs, massive cuts in pension expenditures and a reinvigorated model lineup, the future could be promising, as long as the company can convince domestic car purchasers that buying American is more than just a marketing slogan.

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Ford = future for America, Gov Motors = Obama, do the math.

November 22 2010 at 3:30 PM Report abuse +2 rate up rate down Reply
Richard V. T.

How stupid are investors anyhow ? The issuance of new stock by Government Motors Company dilutes the value of all the stock. I guess that the par value of a share of stock was decimated by this move by GMC ! Most probably par value and future dividends will have been reduced to less than on half of what it was previously ! If I owned any GMC stock I wish that my broker would have cashed it in a long time ago.

November 22 2010 at 11:37 AM Report abuse +1 rate up rate down Reply

It will be a long time before GM means anything other than Gov't Motors. You've got to respect Ford for not compromising like GM did. As for American Made, as the article states, Toyota and Honda are up there in American parts. If you go to the union site, anything involving the union is "American made" so the Tundra is but the Sienna is not. Don't trust these big unions in any case. They are a sad story of Marxist bigwigs padding their pockets at the expense of the workers and could care less about them or our country.

November 21 2010 at 11:17 PM Report abuse +2 rate up rate down Reply

The GM IPO sounds like an offering Bernie (makeoff with the loot) Madoff would be behind ! The taxpayers keep another "too big to fail" company afloat and the average investor has no shot at the IPO . Maybe I had a gut feeling on Thursday when I called my broker and bought Ford. Longterm , i think GM will hemmorage its value and investors will put the money behind a company that never needed a handout in the first place. GM reminds me of American Motors in the 1970's, trying to compete in a marketplace with no real direction, but luring the backing of cash to try to succeed, Good Luck !

November 21 2010 at 10:15 AM Report abuse +2 rate up rate down Reply
1 reply to jpnunan's comment

Many of the part suppliers that supply parts to ford supply parts to GM, maybe you are forgetting about the bail out money to the part suppliers to keep them open. GM Ford and Toyota but parts from these companies. Maybe if you stop listening to the Far Right media you would find out the real truth instead of half truths

November 21 2010 at 10:34 AM Report abuse -1 rate up rate down Reply

Let's hope with all the hype they start making cars that don't fall apart after a year or two. It isn't just about IPO's .... it's about making something good.

November 21 2010 at 10:07 AM Report abuse rate up rate down Reply

The automoble companies have sold out the the American people.It's just buisness as usual the bottom line Money,when the workers tryed to better thier self,they were condemed,but when buisness screws the American people,they call that good for the country.Why should'nt the workers the same ones that buy thier product have a piece of the action.We don't buy they don't sell.WE are in this together.

November 21 2010 at 9:21 AM Report abuse rate up rate down Reply
2 replies to jdwlor's comment


November 22 2010 at 10:52 AM Report abuse -1 rate up rate down Reply

Wiley77, the plant in Brazil has been open for 9 years now. Ford has 33 plants all over the world. and 18 in the U.S. The company wanted to build a plant like that in the U.S. BUT Ford sources said it is the sort of plant the company wants in the United States, were it not for the United Auto Workers, which has historically opposed such extensive supplier integration on the factory floor.

November 22 2010 at 9:49 PM Report abuse rate up rate down Reply

GM sucks, got bailed out by the American Taxpayers and then launches an IPO and we are not allowed to get in on it. We the little people who saved your ass GM. Buy Ford never took a dime in bailout and have the top three cars on the market right now.......................

November 21 2010 at 9:03 AM Report abuse +2 rate up rate down Reply
1 reply to Spoonercat's comment

Get your facts straight

November 21 2010 at 10:39 AM Report abuse rate up rate down Reply

What do you mean the UAW and CAW traded their pensions for a stake in the company? I believe this statement to be incorrect. The GM UAW retirees are recieving their full pensions.

November 21 2010 at 9:02 AM Report abuse rate up rate down Reply

Why are we giving asian manufacturers a huge tax break? This should not be allowed period!

November 21 2010 at 8:51 AM Report abuse +2 rate up rate down Reply

Its all a wallstreet and gov. scam. wait when the market crashes. it will because it based on speculations and not fundamentals. All the stockholders and taxpayers will be out of their investment and no responsibility or countability to wallstreet or the gov. Its their way of stealing the rest of the baby boomers money that they work all their lives for. The baby boomers are the only ones with any cash. when its gone then we all be enslaved.

November 21 2010 at 4:51 AM Report abuse +2 rate up rate down Reply