Ford Reportedly Seeking Buyers for Ailing First Nationwide Bank

Ford Motor Co. is trying to sell its San Francisco-based First Nationwide Bank, sources confirmed Wednesday, an acknowledgment that the auto maker made a strategic mistake when it entered the savings and loan business eight years ago.

Ford officials would not comment on the move. “Our policy is to neither confirm nor deny possible sales or acquisitions,” spokesman David Krupp said.

The auto maker acquired First Nationwide Financial Corp., the thrift’s parent company, in 1985 for nearly $500 million with the goal of smoothing out dips in auto earnings with a steady stream of profits from other businesses.

Instead, the savings and loan, the nation’s fifth-largest with $16.7 billion in assets, became a drain. In addition to the $493-million purchase price, Ford has pumped more than $1 billion into First Nationwide, largely to bolster its capital.

Since 1991, the thrift has racked up losses of $196 million--most related to bad commercial real estate loans in California and New York.

However, the attempted sale comes as First Nationwide’s financial condition is improving. It made money in each of the last four quarters, and its bad-loan portfolio declined 25%. Still, it has $1 billion in bad loans.

“It’s not a surprise that they would sell it,” said one source close to Ford. “They have been dressing it up to get rid of it.”

Rumors have persisted for years that Ford wanted to sell First Nationwide. Company officials insisted, however, that Ford saw the financial institution as a long-term investment.

But sources said Ford has retained an investment banking firm--reportedly J.P. Morgan Securities--to find a buyer. H.F. Ahmanson, parent of Irwindale-based Home Savings of America, reportedly was approached as a possible buyer. A spokesperson for Home Savings declined to comment.

First Nationwide could be difficult to sell in one piece. Although it has 182 branches in eight states and 32 loan offices in six states, it is not a dominant force in any area.

Even in California, its home base and biggest market, it is overshadowed by larger savings and loans, such as Home Savings and Great Western Bank. First Nationwide has 36 branches in Northern California and 15 in the Southland.

Ford acquired First Nationwide from National Intergroup, an industrial conglomerate. Then-Chairman Anthony Frank said he aimed to turn the financial institution into a consumer banking powerhouse in the same league as Citicorp and Sears, Roebuck & Co.

For a couple of years, First Nationwide did bring sporadic profits to Ford, but, like much of the savings and loan industry, it began suffering huge losses from real estate investments gone sour.

First Nationwide was hurt by aggressive loans for small apartment buildings in New York. It also had problems with bad loans obtained from troubled thrifts it acquired. And then the California economy nose-dived.

While First Nationwide may have been a poor investment for Ford, the company’s strategy to build a financial services pillar to see it through downturns in the auto business has held up.