Ford plans stock offering
With Wall Street increasingly confident about Ford Motor Co.’s survival, the company now wants to test investors’ appetite for more stock.
After the market closed Monday, Ford announced plans to sell 300 million new shares. At Monday’s closing price of $6.08 a share, the deal would raise $1.8 billion in cash.
The company said proceeds from the offering would be used to fund a portion of the payments it owes to the United Auto Workers’ retiree healthcare trust.
Ford shares fell more than 5%, to about $5.75, in after-hours trading. Such a drop is typical on the heels of an offering announcement.
The company has about 2.9 billion shares outstanding, so a 300-million-share offering would dilute current investors’ holdings by about 10%.
Ford’s stock has surged more than 250% over the last two months while the outlooks for rivals Chrysler and General Motors have worsened drastically.
Unlike its rivals, Ford decided against taking federal loans to shore up its finances, opting instead to focus on renegotiating union contracts, cutting legacy costs and reducing debt. Chrysler has filed for bankruptcy protection and GM may have to follow by June 1.
In a statement pitching the new stock deal, Ford Chief Executive Alan Mulally said the company continued “to make strong progress on our transformation plan -- gaining retail market share with great new products, improving quality, reducing costs and positioning Ford for a return to profitability.”
The stock offering, he said, “is another example of the fast, decisive action we are taking as we build momentum on our plan, including further progress on improving our balance sheet.”
In February, Ford negotiated a deal with the UAW that let it pay in stock as much as half the $13.6 billion it owes the retiree healthcare fund.
Although the Ford family would have maintained a majority voting stake through its holding of Ford’s Class B shares, giving nearly $7 billion in equity to the healthcare fund would have marked a significant change in ownership of the carmaker, which has a $17-billion market value.
Shifting some of that back to cash may signal Ford’s intent to keep the union’s hand out of its boardroom, said analyst Shelly Lombard of debt research firm Gimme Credit.
“In a perfect world, it makes sense to have the union’s interests aligned with your own,” Lombard said. “But this is not a perfect world. Ford may not want to give that much share to the union.”
On the other hand, Ford may simply be seizing a good opportunity, as the carmaker did in late 2006 when it borrowed $23 billion in a move that ultimately saved it from having to turn to Washington for help even as GM and Chrysler were collapsing.
With the public hungry for Ford stock, now may be a good time to raise cash without tapping the debt market.
“Ford has been right before in terms of getting money when the getting is good,” Lombard said.
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ken.bensinger@latimes.com
