Ford Family Starts Wondering If It's Time to Sell

This idea may be gaining currency with shareholders and among some of the heirs of Henry Ford, confronting family leaders with the prospect of ceding control of Ford Motor Co. whether they like it or not.

The company has borrowed to the hilt and probably will need fresh investment capital in just a few years to pay for factories, new models and expansion into worldwide markets. Will investors and lenders risk additional billions given the family's dismal history as controlling shareholder? It's hard to imagine.

With the recent wave of private-equity interest in Detroit automakers and suppliers, the moment is favorable for Ford to find a financial ally. But investors usually aren't willing to risk the whims of family controlled management -- unless the family has an outstanding record.

On May 10 Ford shareholders rejected a proposal to end the family's control. The proposal faced long odds since the family holds 40 percent of the votes. But the margin of defeat was narrower this year than in earlier years. The results implied that 45 percent of the non-family voters want to see the family out of power.

Since its founding 104 years ago, Ford has always been controlled by Fords, albeit with lots of hired hands. Today the direct descendants of Henry Ford number 47, mostly in the fourth and fifth generations. More than once the family has summarily fired or forced out non-family chief executive officers. @@page@@

Stepping Down

In the most recent such episode the family may have had a hand easing out one of its own. After a run of disappointing financial results, Bill Ford Jr. last September abruptly gave up his job as CEO in favor of Alan Mullaly, a senior Boeing Co. executive recruited to try and turn around the troubled automaker. Bill Ford Jr. remains chairman.

Mullaly swung into action, pledging most of Ford's assets to borrow $23.5 billion in cash. Because automaking is a long lead-time business, whatever Mullaly does won't bear fruit for two to three years. Ford's cash hoard should last during the period, when no profit is expected. Then, who knows?

Investors' doubts are reflected in Ford's stock price of $8.78, giving the world's third-biggest carmaker a market value of $16.5 billion, a little more than Harley-Davidson Inc. The price, down 75 percent from its peak in 1999, can be seen as little more than a call option on the company avoiding bankruptcy until 2010. By then, Mullaly has predicted, Ford will be profitable again. It had a net loss of $12.6 billion last year and $282 million in the first quarter.

Circle of Trust

Bill Ford, 50, his cousin Edsel, 58, his father Bill Sr., 82, and a handful of Fords hold or have held senior positions at Ford or on its board. They, and dozens of other family members, own super-voting Class B shares in a family trust. Class B stock represents 40 percent of the shareholder vote with less than 4 percent of the equity.

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

On April 21, the Fords met with investment bankers Joseph Perella and Peter Weinberg in Dearborn, Michigan. Mullaly also spoke at the meeting, which was held to brief family members, most of whom aren't close to the company's operations.

The meeting was private, though Steve Hamp, Bill Ford Jr.'s brother-in-law, later told the Detroit News that ``the concept of bringing in an outside adviser everybody agreed it was not time.''

Family Dilemma

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

Some Fords, such as Bill Ford Sr., owner of the Detroit Lions, and Elena Ford, 40, daughter of a Greek shipping tycoon, would be rich even without owning a piece of an automaker. Other Fords, no doubt, are feeling the pinch after the company's common stock dividend was suspended last summer.

The bigger fear for the less-wealthy Fords is bankruptcy, which would render their shares worthless and make a sale today at $8 or $9 a share seem smart. And who, other than the wealthier cousins, would blame them?