Ford Motor Company to Go Private?
Ford Motor Company isn’t the only automaker struggling right now, but it, along with Michigan neighbour and longtime rival General Motors, is most often in the limelight. Why such media criticism? Sometimes it gets flack for introducing vehicles that don’t appear to be as boldly designed, significantly powerful or as environmentally friendly as its competitors, but recently most of the flack its getting is about business; or more specifically the lack thereof. What to do?
One possibility is to take the company private, a move that would close its doors to prying eyes, limiting information available to the media and potentially allowing it to restructure in peace.
According to an article in the Detroit Free Press today, Ford has been considering many options in recent meetings.
“The family is willing to look at anything,” said an unidentified source that the Detroit Free Press says is close to the discussions. “A lot of different scenarios are being gamed out.”
The timing to go private couldn’t be better, being that Ford’s share price closed at a meager $7.76 USD yesterday, allowing the company’s outstanding shares to be bought up for only $13.34 billion USD. While this isn’t the lowest its shares have been traded for, with trades varying between $6.06 USD and $10.20 USD in the past year, overall it’s a lower than average price. Ford Motor has a market capitalization of $14.5 billion USD, only a quarter of DaimlerChrysler’s market cap, a company only a quarter the size.
The Ford family only holds 5 percent of the company’s outstanding shares, but it controls 40 percent through a separate class of stock, says the Detroit Free Press. In addition to private investors, about 600 banks or investment firms own shares in Ford, plus 790 mutual funds.
Ford Motor’s “Way Forward” restructuring plan, first shown in January of this year, has been hampered by a severe drop-off in sales this year, therefore the automaker will expose a revised version next month. Overall, Ford lost $1.4 billion USD during the first half of 2006.
Reportedly the company’s executives are willing to discuss any possible option to turn the automaker around, options that have recently included the possibility of selling off Jaguar, Hyundai purportedly interested, dramatically reducing its workforce and even closing more plants.
Another option could be to form an alliance with a competitor, such as GM has reportedly been attempting to do with Renault-Nissan. Actually, according to a Detroit News report, Bill Ford has shown interest in discussing a similar alliance with Renault-Nissan CEO Carlos Ghosn if talks with GM don’t succeed.
“People are talking to each other more these days since the Nissan-GM talk started,” a Ford Motor insider told Detroit News. “If we are entering a period of consolidation, you don’t want to be left without a chair when the music stops… We are in a position of evaluating our options.”
Without doubt, much change could be on the horizon for Ford Motor Company.