First Nationwide Thrift May Have Sideswiped Ford : S&Ls;: The subsidiary’s profits are lackluster, its troubled loans are up and it has regulatory woes. The auto maker has spent enough money on the unit to develop another car.

In a sales promotion last summer, Ford Motor Co. officials tried to park an Escort and a Mercury Tracer in the Walnut Creek, Calif., branch of the company’s First Nationwide Bank. But the Tracer was unable to squeeze through the door and ended up with an embarrassing scrape on the side.

Likewise, the giant auto maker’s squeeze through the door of the clubby savings and loan business has left it scraped and bruised. Profits at its First Nationwide Financial unit have been lackluster at best in the five years since Ford entered the business, its troubled loans nearly doubled in the past year to a huge $1.1 billion and federal thrift regulators are about to slap it with a fine for improperly transferring mortgages and other assets between its thrift units.

Once hailed as a visionary acquisition for Ford, First Nationwide is now seen by a growing number of thrift executives and analysts as the auto maker’s $1.5-billion mistake. Six months ago, Ford had to make an unanticipated $250-million infusion into First Nationwide to shore up its sagging finances. All told, the money Ford has spent on First Nationwide since acquiring the thrift could have been used by the auto maker to develop a new car.

“If Ford had any inkling of the difficulty that would develop in the savings and loan business, I doubt very much it would have entered the industry,” said John Casesa, an auto analyst with Wertheim Schroder & Co., a New York investment banking house.

One senior executive at a First Nationwide rival puts it more bluntly: “The people at Ford have to be asking themselves ‘What did we get ourselves into?’ ”

The news continues to be bad. Last Tuesday, First Nationwide disclosed that it lost $20.9 million in the first quarter after setting aside $66 million to cover problem loans. That is in contrast to a $35.9-million profit a year earlier. Although First Nationwide has turned an annual profit each year Ford has owned it, it is failing to live up to Ford’s hopes.

“Are they (Ford) satisfied with the results?” asked John M. Devine, a career Ford executive who became First Nationwide’s chief executive in February. “I think they are disappointed. I’m telling them they are disappointed, and I’m telling them we are disappointed.”

Nonetheless, Ford publicly stands by the thrift, despite the huge amount of money it has spent since acquiring First Nationwide in December, 1985, for $493 million. Barring a further collapse in the national real estate markets, Ford and First Nationwide executives say, no further infusions are expected.

“We don’t have any plans to put more in. But in the real estate market, you can never speak with 100% certainty. Certainly the phrase ‘black hole’ is not very attractive to us,” said Kenneth Whipple, the Ford executive vice president who oversees First Nationwide as president of the Ford Financial Services group.

Still, First Nationwide continues to be dogged by persistent rumors that Ford, hurt by the auto recession, would like nothing better than to get rid of First Nationwide and that the only thing stopping it is the scarcity of potential buyers. This isn’t the mid-1980s, critics note, when Ford was flush with cash, automobile companies were booming and the thrift industry had not become a basket case.

“I think they would love to divest the bank and divert more of their capital to the car and automobile business,” Casesa said.

Ford and First Nationwide executives have repeatedly denied that Ford wants to rid itself of the thrift. Indeed, in a two-page question-and-answer sheet distributed to managers last week, First Nationwide said, “Ford’s strategy is not going to be sidetracked by short-term difficulties.”

Devine, however, notes that First Nationwide must ultimately achieve its goal of providing Ford an average annual return of 15% on its investment, something that is increasingly hard to do in the troubled savings and loan business. As part of that effort, Devine has instituted a cost-cutting program during the past two years. As a result, first-quarter operating expenses have declined 24% in that period.

“Our mission is pretty clear; we have to provide a return to Ford Motor Co. that meets our requirement to grow this business. If we can’t do that over time, we shouldn’t be in this business,” Devine said.

The job of shaping First Nationwide was given earlier this year to two men--Devine, 46, a tough, intense executive, and Jon M. Christoffersen, 48, a relaxed former Citicorp executive brought in to give the thrift some banking discipline.

Devine, who bears a striking resemblance to actor Kyle MacLachlan, who plays the quirky FBI Agent Dale Cooper on ABC’s “Twin Peaks” series, joined First Nationwide in late 1988 from Ford’s truck division, where he was controller. He became chief executive in February. Christoffersen took over as president and chief operating officer Feb. 1.

First Nationwide is a long way from the days when it was run by Anthony M. Frank, now postmaster general. As chief executive, Frank was a charming, polished and publicly accessible executive well liked by employees. Under Frank, First Nationwide was an informal place marked by such things as a “Children’s Hour” in which executives would gather for drinks and loose talk at the end of each day.

Competitors often grumbled that Frank was better at generating good press than generating good numbers for his thrift. Indeed, First Nationwide’s profits through the 1980s were nothing special, which critics of the acquisition say Ford failed to see. Its return on average assets--a key measure of profitability--rarely came close in the decade to 1%, considered a benchmark for excellence that means that $1 is earned for every $100 in loans and other assets.

Frank’s informal style clashed with the kind of tight ship Ford runs, so he jumped at the chance to run the U.S. Postal Service. One former executive said Ford’s style is that “people are interchangeable,” which has been hard on employees used to Frank’s more easygoing style. About 75% of First Nationwide’s 5,200 employees have been with the company fewer than five years.

Frank was succeeded by his longtime aide, Robert E. Lackovic, a pleasant, amiable executive but viewed by former associates as lacking in the forcefulness needed for the job. The perception grew that Lackovic was a caretaker and that Ford was really running the show, including deciding to ease him out this year through an early retirement.

Lackovic, 58, disputes those stories, saying Ford never second-guessed him. He said he left in part because he was married in January and wanted to start a new life and because the thrift business “was no fun anymore.”

First Nationwide was bought with the goal of making it an important pillar in Ford’s financial services strategy. By building a huge financial services business, Ford would smooth out profits that rise and fall dramatically with the cyclical fortunes of the auto industry. First Nationwide, it was hoped, would be a highly profitable consumer bank by 1995 rather than a staid savings and loan.

Indeed, Ford’s financial services strategy has been highly profitable, thanks mostly to its credit card and car financing units. Last year, financial services accounted for 89% of Ford’s profit. Seemingly lost in the announcement last week of a record $884-million quarterly loss by Ford was the news that its financial services unit earned a record $271 million.

But First Nationwide is clearly the weak sister of the group for reasons that range from bad timing to a grand, expansionist strategy that backfired. After Ford bought it, First Nationwide, armed with $475 million from Ford, launched a nationwide acquisition binge of troubled thrifts in such states as Ohio, Illinois and Colorado that doubled its size but never went as smoothly as planned.

That has given First Nationwide what Christoffersen calls a “Rolaids period” marked by difficulty in digesting the acquisitions.

“It’s extremely difficult to buy sick things and put them together. I guess the real bottom line of the dilemma we face is that even today in 1991 we still have some indigestion,” Christoffersen said.

It also made loans in once-hot markets far from its home base of San Francisco. About 37% of its past-due loans are in the New York-New Jersey area. Many are on older New York apartment buildings, typically about $1.5 million in size, made on buildings with 20 to 30 units. First Nationwide calls them “mature” apartment buildings. Devine calls them “the four-story red-brick apartments in Queens.”

The problem is that the building owners’ operating costs soared last year because of higher taxes, higher payments on adjustable mortgages and higher heating oil. In addition, rising unemployment made it more difficult for some tenants to pay. The owners have a hard time recovering costs because of strict rent control, Devine said.

Ford is also discovering the problems of owning a business that is highly regulated. The 1989 savings and loan bailout legislation made owning an S&L; a headache for many, forcing thrifts to tie up most of their assets in low-margin home loans. As a result, First Nationwide has put up for sale its profitable housing development operation.

Furthermore, Ford learned regulators are tougher. Earlier this year, they forced First Nationwide to sign a “supervisory agreement” after they discovered that the thrift was transferring mortgages between its units to bolster profits of the weaker ones. In one case, they were criticized for transferring office furniture from one thrift to another without getting an outside appraisal of what it was worth.

Analysts and executives say regulators are likely to hit First Nationwide with a fine of $1 million to $2 million, pocket change for Ford and First Nationwide. Nonetheless, Devine sees the episode as a public embarrassment. Supervisory agreements once were scarlet letters of the industry, implying that you were almost out of business and that regulators were actually running the show. Although neither is true for First Nationwide, Devine said, the stigma will remain for some time.

The action by regulators raised criticisms of First Nationwide that have been heard repeatedly since Ford took it over in 1985. Not used to having someone oversee one of its businesses so closely, Ford has been arrogant in the way it has dealt with regulators and the way it ran the thrift, it was charged. The arrogance allegation was underscored when it was revealed that First Nationwide was consulting its directors through board meetings only four times a year, implying that its executives were ignoring them.

Devine denies that but has agreed to regulators’ demands to increase the number of board meetings to 10 a year. He adds that the criticism of First Nationwide as arrogant toward regulators “probably was true” at one point, but no longer.

In any event, having Ford’s deep pockets gives First Nationwide security that many institutions in the thrift industry’s brave new world do not enjoy, a fact not lost on First Nationwide executives. Many industry executives believe that the thrift would be failing by now had Ford not been there to provide the safety net. Do First Nationwide’s executives agree?

“No comment,” said Christoffersen, First Nationwide’s president. “That should speak volumes.”

FIRST NATIONWIDE PROBLEMS Troubled loans at the Ford Motor-owned thrift have climbed sharply within the past year, mostly because owners of New York and New Jersey apartment buildings the thrift financed are having trouble keeping up with their loan payments. The thrift’s ratio of non-performing loans and other assets is about twice what First Nationwide executives would like it to be.

Non-performing Percent of assets* total assets First quarter: $600 million 2.1% Second quarter $700 million 2.3 Third quarter $800 million 2.7 Fourth quarter: $900 million 3.1 1991: First quarter: $1.1 billion 3.8

* Mostly loans 90 days or more past due or where collection is doubtful.