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Ford Wins Exemption in Financial Overhaul Bill

June 26, 2010
2 min to read


WASHINGTON - Ford Motor Co. and three other industrial companies won the right to continue to hedge financial risks, as part of a compromise reached Friday on the federal financial overhaul bill, The Detroit News reported.


One last sticking point was whether Ford, Caterpillar, John Deere and Boeing would be able to use financial instruments known as derivatives to hedge risks.

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U.S. Rep. Gary Peters, D-Bloomfield Township, lobbied his Senate colleagues to get them to accept his language that would allow firms that have a captive finance company -- Ford owns Ford Motor Credit -- to continue to use the financial instruments.


"They aren't speculating," Peters said Friday in an interview. "They are not part of the casino-type atmosphere that we saw on Wall Street. What they are doing is legitimately hedging business risk. They don't try to make profits on crazy derivative synthetic strategies."


Derivatives are financial instruments whose values are determined by the future price of a commodity or other financial entity.


Some Democrats wanted to give the manufacturers two more years to use the derivatives.

Peters said it was "clear there are folks who are legitimate end users" of derivatives. He noted that Ford would use them to hedge against swings in the price of steel or the value of foreign currencies.

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If the effort had failed, Ford would have been at a competitive disadvantage with foreign automakers, Peters said, and would have had to set aside more money to account for the risks.


Congress is regulating the $600 trillion derivatives market. Banks will be forced to spin off or end operations that trade most derivatives.

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