Strategic Boardroom Shift at Ford
Ford Motor Co. lost an influential voice in its boardroom Friday, but the prospect of further changes -- through the sale of Jaguar and other brands -- boosted its stock and sparked talk of impending upheaval at the ailing automaker.
Robert E. Rubin, chairman of the executive committee at Citigroup Inc., resigned his Ford director’s post after six years. In a letter to Chairman and Chief Executive William Clay Ford Jr., Rubin said his company’s “multifaceted relationship” with the automaker could create conflicts as it attempts to raise funds through the sale of assets.
The resignation of Rubin, a former Treasury secretary, came the same day that several published reports suggested that Ford Motor was talking to a private equity fund in which both former company Chief Executive Jacques Nasser and Rubin’s son Jamie are partners.
The fund -- One Equity Partners, a unit of JPMorgan Chase & Co. -- reportedly is interested in acquiring the Jaguar and Land Rover brands from Ford.
Nasser, fired five years ago at the start of an earlier turnaround effort by the Dearborn, Mich.-based automaker, was responsible for creating Ford’s London-based luxury brand unit, Premier Automotive Group, which includes Volvo and Aston Martin along with Jaguar and Land Rover.
Several analysts said Friday that they saw little likelihood of Nasser returning to the auto business and that it was more likely that he was using his knowledge of the those brands to spot a potential bargain that could be repaired and resold for a profit in a few years.
The reports, carried by Reuters and Bloomberg wire services, were based on comments from unidentified insiders. Neither Ford nor One Equity would comment.
Ford, though, has said it is considering a range of options after losing money in seven of the last eight quarters in North America, its largest market. This month the company hired former Goldman Sachs Group mergers-and-acquisition specialist Kenneth H.M. Leet as a strategic advisor.
Leet has been asked to examine asset sales, strategic alliances with other automakers and even a leveraged buyout that could put outsiders in charge of a company that has always been controlled by the Ford family.
“If they do something along those lines, they’re going to have to engage some of the big bankers out there, and Citi is one of the biggest,” Gimme Credit bond analyst Craig Hutson said in explaining Rubin’s departure from the board and the investor reaction it touched off.
“We think there will be something along the strategic side that will be announced by mid-September,” Hutson said.
Ford shares jumped 24 cents, or 3.1%, to close at $8 after trading as high as $8.10 on hope that the company finally was springing into action. The stock has risen 29% since reaching a multiyear low of $6.19 on July 20.
“There’s a lot of speculation whirling around,” said Ken Elias, a partner at automotive consulting firm Maryann Keller & Associates. “The key thing is that something is going to happen.”
Ford lost $1.4 billion in the first half this year. The No. 2 U.S. automaker continued to lose market share to foreign-based rivals led by Toyota Motor Corp. Ford saw a sharp decline, in particular, in sales of full-size pickup trucks and sport utility vehicles, which accounted for more than half of its sales and all of its profit in recent years.
“I don’t think they thought the situation would get as difficult as it has,” said David Cole, executive director of the Center for Automotive Research in Ann Arbor, Mich. “They have said publicly that everything is on the table now. Doing nothing would be disastrous.”
Soaring gasoline prices “really pulled the rug out from under them,” Cole said, and that spurred “a significant falloff in the sale of their most profitable vehicles.”
Ford said this week that it would slash truck production by 28% in the fourth quarter.
In addition to a possible sale of money-losing Jaguar -- a brand into which Ford has poured an estimated $5 billion, including its $2.7-billion purchase in 1989 -- executives reportedly are considering a stock buyback plan to take the company private.
Also on the table are a series of restructuring measures that would broaden Ford’s employee buyout efforts and increase the number of North American factories it plans to close beyond those announced in Ford’s Way Forward plan in January.
CEO Ford has reportedly asked Carlos Ghosn, head of both Nissan Motor Co. of Japan and Renault of France, to consider a strategic alliance with his company if a similar request from General Motors Corp.’s board doesn’t pan out.
Many analysts seem to like the idea of a Ford-NissanRenault alliance, but there’s less enthusiasm for other scenarios.
Taking Ford private would saddle the investors with huge bond debts and continuing obligations under labor union contracts, they say, and selling brands might not generate much cash.
Ford spent $12 billion to buy the Premier Automotive Group companies and several billion dollars more on product development and factory improvements. Ford would “be really fortunate if they could get half that” in a fire sale, Hutson said.
Some insiders say Ford is not likely to sell Volvo, which it acquired for $6.7 billion in 1999. The Swedish brand is profitable and has a strong global image and rising U.S. sales.
But Mike Jackson, chief executive of dealership chain AutoNation Inc., whose Ford stores collectively are the automaker’s biggest U.S. retailer, said Jaguar, along with Aston Martin, Lincoln and Mercury, could go.
“Ford needs to decide on and realize what they are good at, and focus on only those things,” he said. “The brands to go forward with and invest in are Ford, Volvo and Land Rover....
“If they can’t retail vehicles to the U.S. consumer, the rest will simply not matter.”
*
Times staff writer Martin Zimmerman contributed to this report.
