104 Years of Ford Going to Drain
by: Guest
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Word Count: 1089
After years of being one of the
largest and most renowned automaker, it seems like Ford the major stockholder
of Mazda the manufacturer of Mazda cornering light
is finally at its brink. It is no secret that Ford has been facing financial
problems for years now brought about by products that failed to sell well in
the market not to mention the frequent changes in the management stature.
Things have been going from bad
to worst for the automaker that finally shareholders of Ford together with the
heirs of Henry Ford are confronted with the prospect of finally relinquishing
the control of the company whether they like it or not than to lose everything
at the end.
The company has been lending
just to meet the company’s financing needs and right now it has exhausted all
its resources and will need again fresh investment to pay for its factories, to
launch new models, and to push through with its expansion plan for worldwide
markets. The question is: Are there still investors and lenders that would risk
additional billions knowing the family’s dismal history as controlling
shareholder? Frankly with the present condition that the automaker is in, it is
hard to imagine that there would investors that are willing to take the risks.
The present wave of
private-equity interest in
Last May 10, the shareholders
of Ford have rejected a proposal to end the family’s control. The proposal
would definitely face long odds especially since the family holds 40 percent of
the votes. However, the margin of defeat was narrower this year compared to
earlier years. The results show that 45 percent of the non-family voters would
like to see the family out of power.
For the 104 years of Ford it
has always been controlled by the Ford family with the addition of some hired
hands. And it is not only once that the family has summarily fired or forced
out non-family chief executive officers.
In the most recent happening at
Ford the family has ease out one of it own. After disappointing financial
results, Bill Ford Jr. last September have gave up his position as CEO in favor
of Allan Mulally who is a senior Boeing Co. executive recruited to try and help
the automaker regain financial health. On the other hand Bill Ford Jr. has
remained chairman.
CEO Mullally optimistic in
spite of crisis
After his appointment as new
CEO, Mulally has swung into action pledging most of Ford’s assets to borrow
$23.5 billion in cash. And because auto making is a lead-time business, it
would take at least two to three years before Mulally could see the results of
all his efforts. Hopefully Ford’s cash hoard will last during that period and
of course it is also expected that the automaker should gain profit before it
run out completely of cash.
The current price of Ford’s
stock is $8.78 giving it a market value of $16.5 billion, which is a little
more than that of Harley-Davidson Inc. The price of the automaker is down by 75
percent from its peak in 1999, this can be seen as little more than a call
option on the part of the company avoiding bankruptcy until 2010. Despite the
crisis that the company is in right now CEO Mulallly is optimistic that the
automaker will be profitable again. Ford has obtained a net loss of $12.6
billion last year and $282 million in the first quarter of this year which
makes me wonder for how long CEO Mulally can keep up its positive facade.
The Circle of Trust
Bill Ford aged 50 with his
cousin Edsel 58, his father Bill Sr., 82, plus a handful of Fords---all have
held senior positions at Ford or on its board. They together with dozens of
other family members also owned super-voting Class B shares in a family trust.
For those who are not aware of what Class B stock is it represents 40 percent
of the shareholders vote with less than 4 percent of the equity.
Class B shares are owned by
family members only. In case no family member wants to buy B shares these
shares they are put up for sale where they are converted to Class A shares and
ultimately sold for cash. When enough B shares are converted, the family loses
a proportion of control.
Last April 21, Ford met with
investment bankers Joseph Perella and Peter Weinberg in
According to David Cole,
Chairman of the Center for Automotive Research in
Not all Fords are worried about
the imminent bankruptcy of Ford Motors like for instance Bill Ford Dr., owner
of the Detroit Lions, and Elena Ford, 40 daughter of the Greek shipping
tycoon---these are Fords that are rich even without owning a piece of the
automaker. However the other Fords those that are not really rich and are just
depending on the stock dividend from the Ford Motors are really feeling the
pinch especially after the company has suspended the release of common stock
dividend last summer.
If the suspension of common stock dividend had
already a great impact on some of the members of the Ford family just imagine
their worries if Ford Motors finally ends in bankruptcy which would definitely
render their shares worthless unless of course they start selling their shares
today which by the way only cost a meager $8 or $9 a share.
About the Author
Kraig
Johanssen is a native of
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