Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Silver Bull Market Update - 7th Aug 20
This Inflation-Adjusted Silver Chart Tells An Interesting Story - 7th Aug 20
The Great American Housing Boom Has Begun - 7th Aug 20
Know About Lotteries With The Best Odds Of Winning - 7th Aug 20
Could Gold Price Reach $7,000 by 2030? - 6th Aug 20
Bananas for All! Keep Dancing… FOMC - 6th Aug 20
How to Do Bets During This Time - 6th Aug 20
How to develop your stock trading strategy - 6th Aug 20
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

104 Years of Ford Motoring Going Down the Drain

Companies / US Auto's May 29, 2007 - 06:54 PM GMT

By: Submissions

Companies After years of being one of the largest and most renowned automaker, it seems like Ford the major stockholder of Mazda the manufacturer of Mazda cornering light is finally at its brink. It is no secret that Ford has been facing financial problems for years now brought about by products that failed to sell well in the market not to mention the frequent changes in the management stature.

Things have been going from bad to worst for the automaker that finally shareholders of Ford together with the heirs of Henry Ford are confronted with the prospect of finally relinquishing the control of the company whether they like it or not than to lose everything at the end.

The company has been lending just to meet the company's financing needs and right now it has exhausted all its resources and will need again fresh investment to pay for its factories, to launch new models, and to push through with its expansion plan for worldwide markets. The question is: Are there still investors and lenders that would risk additional billions knowing the family's dismal history as controlling shareholder? Frankly with the present condition that the automaker is in, it is hard to imagine that there would investors that are willing to take the risks.

The present wave of private-equity interest in Detroit automakers and suppliers would have been at Ford's advantage to find a financial partner but unfortunately most investors are not that willing to risk on the whims of family controlled management unless of course the family happens to have an outstanding record when it comes to handling a business.

Last May 10, the shareholders of Ford have rejected a proposal to end the family's control. The proposal would definitely face long odds especially since the family holds 40 percent of the votes. However, the margin of defeat was narrower this year compared to earlier years. The results show that 45 percent of the non-family voters would like to see the family out of power.

For the 104 years of Ford it has always been controlled by the Ford family with the addition of some hired hands. And it is not only once that the family has summarily fired or forced out non-family chief executive officers.

In the most recent happening at Ford the family has ease out one of it own. After disappointing financial results, Bill Ford Jr. last September have gave up his position as CEO in favor of Allan Mulally who is a senior Boeing Co. executive recruited to try and help the automaker regain financial health. On the other hand Bill Ford Jr. has remained chairman.

CEO Mullally optimistic in spite of crisis
After his appointment as new CEO, Mulally has swung into action pledging most of Ford's assets to borrow $23.5 billion in cash. And because auto making is a lead-time business, it would take at least two to three years before Mulally could see the results of all his efforts. Hopefully Ford's cash hoard will last during that period and of course it is also expected that the automaker should gain profit before it run out completely of cash.

The current price of Fordï's stock is $8.78 giving it a market value of $16.5 billion, which is a little more than that of Harley-Davidson Inc. The price of the automaker is down by 75 percent from its peak in 1999, this can be seen as little more than a call option on the part of the company avoiding bankruptcy until 2010. Despite the crisis that the company is in right now CEO Mulallly is optimistic that the automaker will be profitable again. Ford has obtained a net loss of $12.6 billion last year and $282 million in the first quarter of this year which makes me wonder for how long CEO Mulally can keep up its positive facade.

The Circle of Trust
Bill Ford aged 50 with his cousin Edsel 58, his father Bill Sr., 82, plus a handful of Fords---all have held senior positions at Ford or on its board. They together with dozens of other family members also owned super-voting Class B shares in a family trust. For those who are not aware of what Class B stock is it represents 40 percent of the shareholders vote with less than 4 percent of the equity.

Class B shares are owned by family members only. In case no family member wants to buy B shares these shares they are put up for sale where they are converted to Class A shares and ultimately sold for cash. When enough B shares are converted, the family loses a proportion of control.

Last April 21, Ford met with investment bankers Joseph Perella and Peter Weinberg in Dearborn, Michigan. Mulally spoke at the meeting which was held to brief family members of whom mostly aren't close to the company's operations. The meeting was private although Steve Hamp, Bill Ford Jr.'s brother-in-law, later told Detroit News that the concept of bringing in an outsider as an adviser was not agreed on by everybody saying that it was not yet time.

According to David Cole, Chairman of the Center for Automotive Research in Ann Arbor, Michigan, As most companies go down the road in generations, they have difficulties and that�s why they sell out. Don't think the Fords are different. Do you ride out the troubles or get out? What do you do?ï

Not all Fords are worried about the imminent bankruptcy of Ford Motors like for instance Bill Ford Dr., owner of the Detroit Lions, and Elena Ford, 40 daughter of the Greek shipping tycoon---these are Fords that are rich even without owning a piece of the automaker. However the other Fords those that are not really rich and are just depending on the stock dividend from the Ford Motors are really feeling the pinch especially after the company has suspended the release of common stock dividend last summer.

If the suspension of common stock dividend had already a great impact on some of the members of the Ford family just imagine their worries if Ford Motors finally ends in bankruptcy which would definitely render their shares worthless unless of course they start selling their shares today which by the way only cost a meager $8 or $9 a share.

By Kraig Johanssen

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules