Ford rewards investors in revamping of its ownership; Special dividend of record $10 billion; Auto industry


DEARBORN, Mich. -- Ford Motor Co. announced a complex revamping of its ownership structure yesterday, including the payment of a $10 billion special dividend -- the largest ever by a U.S. company -- and the issuance of additional stock to the Ford family, cementing its grip on the world's second-largest industrial corporation.

The plan is designed to let Ford distribute nearly half its $24 billion cash hoard, one of the largest of any company in the world, while minimizing taxes for its shareholders and giving the Ford family greater financial flexibility, particularly for estate planning.

But the big cash disbursement could leave Ford somewhat more vulnerable in a recession, although the company will still have as much cash after the special dividend as General Motors Corp. has now.

The dividend may limit somewhat Ford's ability to undertake further large acquisitions -- Ford bought Volvo a year ago and agreed last month to buy Land Rover from BMW. But Jacques A. Nasser, Ford's chief executive, said the company would not rule out further deals.

The recapitalization plan unveiled yesterday is a delicate balance between the interests of Ford's public shareholders and the interests of Henry Ford's descendants. Big institutional shareholders and Wall Street analysts have been urging Ford since the mid-1990s to disburse some of its enormous cash hoard by buying back stock.

But the Ford family has always resisted share buybacks, insisting on dividends instead because of the special class of stock that the family holds.

The Ford family holds all 71 million shares of the company's Class B stock, along with a small number of the company's 1.1 billion common shares. Under rules that were designed to preserve family control and were drafted when the company went public in 1956, the family holds 40 percent of the voting power at the company as long as it continues to own at least 60.7 million shares of the Class B stock -- even though the Class B shares make up only 6 percent of the company's overall equity.

If the family sells too many shares of its Class B stock, whether to pay estate taxes, cover personal expenses or simply participate in a stock buyback, then the family's influence shrinks.

If the family's holdings fall to between 33.7 million and 60.7 million shares of Class B stock, the family wields only 30 percent of the voting power. And if the family's holdings fall below 33.7 million shares then all special voting privileges are lost.

When Class B shares are sold outside the family, they revert to common stock. Under yesterday's plan, each holder of Ford's common or Class B stock will be given a choice of receiving $20 a share in cash or additional common stock.

William C. Ford Jr., Ford's chairman and one of Henry Ford's 13 great-grandchildren, said the members of the Ford family would take additional stock for all of their Class B stock.

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