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Ford's Mulally: One Failure Could Imperil Industry

Tuesday, 18 Nov 2008 | 11:24 AM ET

FordCEO Alan Mulally says the bankruptcy of even one of America's auto companies could bring down the entire industry.

Boeing Co. Executive Vice President Alan Mulally speaks after signing an agreement with Air India in Bombay, India, Wednesday, Jan. 11, 2006. State-run Air India on Wednesday signed an agreement with U.S.-based Boeing Co. for the purchase of 68 planes valued at more than US$ 11 billion, in what officials called the largest single deal in India's civil aviation history. (AP Photo/Rajesh Nirgude)
Rajesh Nirgude
Boeing Co. Executive Vice President Alan Mulally speaks after signing an agreement with Air India in Bombay, India, Wednesday, Jan. 11, 2006. State-run Air India on Wednesday signed an agreement with U.S.-based Boeing Co. for the purchase of 68 planes valued at more than US$ 11 billion, in what officials called the largest single deal in India's civil aviation history. (AP Photo/Rajesh Nirgude)

"The industry is so interdependent," Mulally told CNBC. "We're nearly 10 percent of the U.S. GDP, and if one of the automobile manufacturers gets into serious trouble, it has tremendous implications for the entire industry."

He stressed the need for government assistance to the carmakers, a need he and other car-company CEOs were to voice before the Senate Banking Committee later in the day. (Click here to see his interview on CNBC)

"As an industry, we're there together to support having in place a mechanism, our bridge loan," he said. "We think we don't need it right now, but if things continue to deteriorate, we can access these bridge loans as part of our transformational plan."

Mulally said that if an auto company were to file for Chapter 11 bankruptcy protection, the situation might quickly move to Chapter 7, or liquidation.

"Going into that kind of a restructuring, where the consumer has great choices, sales would fall off so fast that you could never recover on the cost side and get out of it," he said.

Mulally defended his leadership of the nation's second-largest carmaker, saying Ford is moving in the right direction, and recalling the company's return to profitability in the first quarter.

Mulally spoke to CNBC ahead of his testimony before the Senate banking committee Tuesday afternoon where the three Detroit auot CEOs will try to convince lawmakers to provide a bailout. Also, scheduled to be at the hearing are General Motors CEO Rick Wagoner and Chrysler CEO Robert Nardelli as well as United Auto Workers union President Ron Gettelfinger.

The industry has been battered by record high gasoline prices, tightening credit and a weak economy.

Congress is considering wehter to provide funding to the automakers to help the weather the storm. These funds would be in addition to $25 billion authorized by lawmakers early in the year to assist the companies in improving their technology and making more fuel-efficient vehicles.

Ford has attempted to raise cash by other means as well. The company said Tuesday it would sell a 20 percent stake in Japanese automaker Mazda Motor. Ford will raise more than $538 million from the sale and remain Mazda's top shareholder with a stake of more than 13 percent.

Meanwhile to help spur sales, Ford announced employee pricing, zero percent financing and cash incentives on a variety of its vehicles. The deals start Wednesday and run through Jan. 5. Ford will offer zero percent financing for 36 months on top of employee pricing on many of its most fuel-efficient models.

Customers also will have the option of as much as $6,000 in cash back on many of the models instead of the zero-percent financing.

-AP and Reuters contributed to this report.

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