Ford Plans $5-Billion Share Repurchase
Ford Motor Co., acting to reassure investors who have driven its stock down 13% since the Firestone tire recall, on Thursday announced a $5-billion share repurchase, its largest buyback program ever.
The buyback plan came at the time directors of the world’s No. 2 auto maker, meeting for the first time since the Aug. 9 recall, solidly backed management efforts to deal with the enveloping crisis that has tarnished the company’s image.
“The board is satisfied that all appropriate resources are being deployed to deal with customers’ needs,” the company said in a statement.
Ford shares immediately rose following the stock buyback news, and closed up 56 cents at $25.88 on the New York Stock Exchange, compared with a 52-week range of $32.69 to $23.
The buyback was larger than Wall Street expectations of a $4.3-billion repurchase.
In fact, several analysts had speculated the board would suspend the program because of fears it would be a bad public relations move at a time when customers, particularly owners of the Ford Explorer sport-utility vehicle, are struggling to find replacement tires.
Government officials are investigating reports that Firestone tires, most of them on Explorers, shredded and led to accidents that killed more than 130 people. Firestone is a unit of Japan’s Bridgestone Corp.
“The timing is surprising, the fact they are doing it is not,” said David Healy, an analyst with Burnham Securities. “I thought they would wait until some of the furor in the media of this Firestone tire recall would die down, but I guess they felt it was time.”
Ford Chairman William Clay Ford, in his first public comments since the recall, said the board wanted to live up to this summer’s Value Enhancement Plan that was intended to return $10 billion of Ford’s bulging cash hoard to shareholders. Because more shareholders opted for stock than expected, Ford paid out only $5.7 billion.
“Our shareholders have stuck with us through all of this, and we felt that we needed to live up to what we told them in terms of the Value Enhancement Plan commitment, and actually take it a little further,” he said.
Ford said the board, which spent most of its meeting discussing the recall, also felt the buyback would not hurt efforts to find replacement tires.
Asked if he will take a more visible role in defending the company--a job left so far to Chief Executive Jac Nasser--Ford said it is more appropriate for operating executives to handle the topic as long as tires need to be replaced. But he said he will become more publicly active if he sees an opportunity to help.
In addition to the buyback, Ford signaled the fourth-quarter dividend rate it will declare following a board meeting in October. The company said an annual dividend rate of $1.14 per share would be comparable to the previous rate of $2 a share before the Value Enhancement Plan was conducted.
