Ford mulls going private; Rubin out

Ford Motor Co. has only been a public company for 50 years. And with its stock trading at about $8 a share, would now be a good time for the ailing car maker to go private?

Some observers think so.


The currency for the idea has increased this week as more media and pundits jump on it as a plausible choice that doesn't necessarily preclude other options for the company righting itself.

"There's a lot of private equity money out there," said Steve Jones, a finance professor at Indiana University's Kelley School of Business. "Going private means the managers are free to focus on the core of the business for the long term instead of producing results every three months."


In theory, going private shouldn't be that difficult. The Ford family already owns 40 percent of the voting stock, enough to launch a tender offer.

Going private would be a return to family heritage. Founder Henry Ford bought out investors in 1919, and the company didn't go public until 1956.

Ford's market value is $14 billion at its current share price of $8.00 and Jones believes that the company could easily attract private equity investors to finance a tender offer: "Basically, the family could become a partner with private equity investors, but the family will have to convince investors that it can turn the company around."

And that's where things get shaky. Ford lost $1.4 billion in the first half of this year, and last week reduced its fourth-quarter production by 168,000 vehicles.

The 21 percent cut will put a huge dent in revenue and could delay Ford's efforts to get its North American operations profitable by 2008.

An accelerated restructuring plan is expected to be announced next month.

Then there's the issue of the Ford at the top of Ford Motor.

Chairman and Chief Executive Officer William Clay "Bill" Ford Jr., great-grandson of the founder, is "a very smart guy," said Rebecca Lindland, of industry forecaster Global Insight. "But he's not a turnaround expert. He's never done this before."


As long as the family is in charge, she said, the company will have a hard time attracting top management talent.

That's key because Ford needs to hire a product guru like General Motors Corp. Vice Chairman Robert Lutz, Lindland said. Lutz gets credit for developing more compelling vehicles that have reduced the need for incentives and boosted GM's revenue.

"I don't see where going private fixes those central issues," Lindland said. "It's not really a matter of controlling costs. It's a matter of improving their revenue stream, and that takes product."

Moreover, private investors can be more impatient than Wall Street and engineer a takeover if they don't see quick results, she noted.

And if Ford is to focus on its core business, it needs to shed itself of distractions that include nameplates it has acquired over the years, including Jaguar.

But who would buy Jaguar and for how much?


Lindland doubts a major automaker would step up, though JCB, a British construction machinery manufacturer, has expressed interest in Jaguar. There's also speculation about a Chinese manufacturer looking to buy its way into global prominence.

Jag might not fetch much, she said. One stinging estimate she heard is that "the name alone is worth $1 billion, but if you throw in all the assets it's worthless."

Lindland and other analysts suggest that Ford also needs to eliminate some of its own brands, notably Mercury, whose models are clones of Ford vehicles. Lincoln is worth saving as a traditional luxury brand to compete against GM's Cadillac, she said.

Not so fast, countered David Cole, chairman of the Center for Automotive Research.

Building Mercurys off the same design as Ford models enables the company to use more of its manufacturing capacity. Ditching Mercury also would leave Lincoln dealers with one line of vehicles, Cole said, "and Lincoln's not doing very well."

Cole sees Ford shrinking, but mainly through more job cuts and factory closings. He also sees Ford forging more alliances..


While Ford has developed hybrid technology, it has been a costly and as yet unprofitable effort. GM has enlisted DaimlerChrysler AG and BMW as partners to share development costs and build a hybrid system that will work on trucks and passenger cars.

"It would be logical for Ford to join that alliance," Cole said. "I'm surprised they haven't. If you're Ford, how would you like to compete with a hybrid full-size pickup or [Chevrolet] Suburban that gets 25 miles per gallon?"

Rick Popely writes for the Chicago Tribune. Tribune auto reporter Jim Mateja contributed to this article.