DEARBORN, Mich. - Ford Motor Co. said yesterday that it will buy back as much as $5 billion of common and Class B stock, increasing the amount of cash it plans to distribute to shareholders by $700 million to $10.7 billion.
The world's second-largest automaker said it would buy the shares in the open market and expects to complete the purchases by the end of next year. At yesterday's $25.6875 closing price, Ford would be able to buy back about 194.6 million shares, or 10 percent of the 1.89 billion common and Class B shares outstanding.
Ford paid out about $5.7 billion last month as part of a recapitalization plan aimed at distributing as much as $10 billion in cash to shareholders. The move helped Ford placate investors by distributing some of the wealth it accumulated in recent years of record U.S. auto demand.
"They have been historically reluctant to do a direct stock buyback," said David Healy, a Burnham Securities Inc. analyst. "I think they're giving shareholders what they want. Also, the cash was burning a hole in their pocket."
The automaker had $25.5 billion in cash and marketable securities as of June 30. Last year, Ford earned $7.24 billion, the most ever for any automaker. Ford's last buyback began in 1987 and concluded in 1989 after repurchasing about $2 billion in stock.
Ford's board did not declare a dividend at its meeting yesterday, though the company estimated that an annual dividend of $1.14 a share would preserve the previous $2-a-share annual payout for investors who chose the all-stock option in the recapitalization. Ford's board will set fourth-quarter dividends next month.
The recapitalization plan swapped old Ford shares for new stock, and investors also got $20 in cash, new shares, or a combination of the two.
The buyback comes as the automaker copes with Bridgestone Corp.'s recall of 6.5 million Firestone tires, many of them used on Ford vehicles.
Some analysts thought Ford might delay a buyback until after the recall to avoid the appearance of taking its focus off the tire issue. Still, others suggested that a buyback would be a way to reward shareholders for staying with Ford as it deals with the recall problems.
"If we felt in any way it would detract from focus in getting our [tire] problems fixed, we wouldn't have done it, said Chairman Bill Ford.