Two outside directors leave Ford
Ford Motor Co. said Friday that two of its outside directors were leaving the company’s board. Ford said the directors, John Bond and Jorma Ollila, were leaving to tend to their primary businesses, but the timing -- amid the worst crisis in the auto industry in decades -- revived questions about the automaker’s stability.
Meanwhile, billionaire Kirk Kerkorian pledged 50 million shares of casino company MGM Mirage to back a line of credit he used to purchase a 6.4% stake in Ford this year.
In the last week, Ford’s financial issues have been overshadowed by those of rival General Motors Corp., which according to several reports is negotiating a merger with Chrysler. But Ford, too, has been buffeted by dwindling vehicle sales, frozen credit markets and its collapsing stock price.
Ford’s U.S. sales are down 17.1% through the first nine months of the year, and the company lost $8.6 billion in the first two quarters of 2008. On Friday, shares in the nation’s second-largest automaker rose 16 cents to $2.43, well off the 52-week high of $8.99.
Ford spokesman Mark Truby said that Bond and Ollila “expressed confidence that Ford has a strong plan and [is] taking the right steps to return to profitability.” Truby added that Ford has “no plans to add new board members at this time.” After the departures, Ford has 12 directors, including Chief Executive Alan Mulally.
Shelly Lombard, senior debt analyst at Gimme Credit, said the move was not surprising considering the difficulties Ford is facing and the other commitments both men have.
“Sitting on the board of a company that’s seriously troubled is a lot of work,” she said. “Ford is probably like a black hole in terms of time commitment right now.”
Bond, 67, has been a Ford director since 2000. He also serves as chairman of British wireless provider Vodafone Group and is a senior advisor to investment firm KKR & Co. He previously was chairman, chief executive and president of HSBC Holdings.
Ollila, 58, also joined the Ford board in 2000. He serves as chairman of cellphone manufacturer Nokia Corp. as well as oil giant Royal Dutch Shell.
GM recently approached Ford about a partnership, but Ford rebuffed the offer, preferring to face the industry’s difficulties alone, according to an individual familiar with Ford’s operations. Under Mulally, Ford has elected to focus on its core brands, selling off Aston Martin, Land Rover and Jaguar. It is studying the possibility of selling its 33% stake in Mazda Motor Corp.
Kerkorian, known for previous attempts to wrest control of GM and Chrysler, spent nearly $1 billion to purchase his stake in Ford this spring. The value of that investment has declined precipitously, dropping to about $342 million as of Friday. His purchases were backed by a $600-million line of credit from Bank of America originally guaranteed by 50 million shares of MGM Mirage.
Shares in MGM Mirage have fallen 70% since April, to $15 on Friday, prompting Kerkorian to increase his collateral on the line of credit by another 50 million shares, in effect putting his controlling stake in MGM Mirage on the line.
“Kerkorian was probably going to get a margin call,” said David Healy, equity analyst at Burnham Securities. “He’s in the red and he wants to save face on this deal.”
--
