Ford Motor Co. Plans $2-Billion Stock Buyback
In one of the largest corporate stock buyback plans announced since last month’s Wall Street crash, Ford Motor Co. said Thursday that it will repurchase up to $2 billion worth of its own shares.
When its latest repurchases are completed, Ford will have spent a total of $4.5 billion since 1984 on a massive stock buyback program designed to reduce its outstanding shares by 25%.
Ford, which currently has 248.7 million shares outstanding, previously announced plans to repurchase 45 million of its own shares, worth about $2.5 billion, and has so far acquired 42.7 million shares.
Ford spokesman Tom Foote said the firm will begin the new round of purchases as soon as the old program is completed. At Wednesday’s closing price of $71.75 per share, Ford said its new plan would cover the repurchase of more than 27 million shares. Ford did not say how long it will take to complete its new buyback plan, however.
Good Financial Shape
But Ford has clearly accelerated its buyback efforts since the October crash. Ford officials said they believe that the market meltdown depressed Ford’s stock price to bargain basement levels. The buyback announcement sent Ford stock up, however; on the New York Stock Exchange Thursday, Ford closed at $74.50, up $2.75.
Industry analysts said they believe the Ford buyback announcement was a sign that Ford remains confident that it can maintain its profitability even if the nation slips into a recession next year and auto sales slump.
“They are putting themselves on the line, showing that they are confident of their earnings power,” said Michael Luckey, automotive analyst with Shearson Lehman Bros.
In fact, Ford is in very solid financial shape, reporting record net income of $703.2 million in the third quarter.
At the end of the third period, Ford had $9.1 billion in cash and marketable securities on hand. That allowed the company’s board last month to increase Ford’s quarterly dividend to a record $1 per share and to approve a 2-for-1 stock split, to take effect in January.
The company’s multibillion cash cushion will also be more than enough to cover the $2-billion buyback program and the company’s recent big acquisitions. In October, Ford said it would pay $1.3 billion for majority ownership in Hertz, the rental car giant, and also announced that it would pay another $512 million for United States Leasing International, an equipment leasing firm.
