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Ford's centennial stirs questions about future

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Automotive News
Reuters / June 09, 2003

DETROIT -- When all but one of Henry Ford's direct living descendants gather in coming days to celebrate the founding 100 years ago of the Ford Motor Co., it will be hard to mask the air of despair hanging over Detroit.

The anniversary on June 16 will mark the largest gathering ever for the first family of the U.S. automobile industry, and is likely to be remembered for more than just a big celebration of the past. The company's future is in the balance.

The centennial comes at a time when the auto industry is adding capacity faster than customers, a fact CEO Bill Ford knows will determine how the world's No. 2 automaker survives, along with the family's say in running it.

"It's a very exciting time for us as a company, but it's also one that's fraught with peril," says Ford, a great-grandson of the founder. "Wrong decisions can be fatal."

There are bigger family-controlled corporations (Wal-Mart Stores Inc. is the biggest), and older ones (Kongo Gumi, a Japanese building company, was founded in 578). And there are other family-run automakers (Peugeot, Fiat, BMW and Hyundai).

But the Ford family's longevity at the helm of a company its size is remarkable. Only 3 percent or 4 percent of families manage to hold onto a company's power beyond the third generation, and many see their control dissipate once they sell shares to the public.

Sixty family members are expected to attend the celebrations, which begin Thursday and culminate Monday.

The Fords are "beginning to defy some of the basic kinds of records of other family businesses, and that's a compliment to the family," said William T. O'Hara, executive director of Bryant College's Institute for Family Enterprise. "They're doing something very right to create that climate for perpetuation."

THE TWO HENRYS

If Henry Ford had his way, the company would have stayed in the family. He blamed the failure of some early competitors on stockholder meddling and was determined to minimize the role of those he called "parasites."

After founding the company with 11 investors in 1903, Henry Ford bought out the largest investor a few years later and by 1919 talked the rest into selling -- thanks in part to his threat to start another automaker and knock off Ford.

When Edsel Ford, Henry's son, died in 1943 he had never taken full control. Only after Edsel's widow threatened to sell her shares and push the family out of control did Henry cede power in 1945 to his grandson, 28-year-old Henry Ford II.

"Hank the Deuce," as he was known for the next three decades, modernized Ford. He also took the company public in 1956 with a two-tiered stock system -- one class for regular shareholders and Class B shares for family members who control 40 percent of the shareholder vote.

Only family members can buy Class B shares, but they can be converted into regular shares and sold. As best as the Fords can tell, no family member has sold a Class B share since the early 1980s.

"The family, now all the way down through six generations, has always been proud of what the company was and is and can be," says Edsel Ford II, Bill Ford's cousin, who sits on the board of directors and worked for 25 years at the company.

"We feel a sense of history, we feel a sense of being part of the company, we feel a sense of legacy. We don't feel a sense of ownership because we don't act like it."

TOUGH TIMES

The centennial comes at an inopportune time for Ford, which has stumbled in the 21st century. Boardroom turmoil and the Firestone tire recall helped knock the company off balance, with losses of $6.4 billion in the last two years.

Ford has surpassed its profit targets this year, but there is still doubt on Wall Street that the company can meet its goal of $7 billion in annual profits by mid-decade.

Saul Rubin, an industry analyst for UBS Warburg, said that with billions in pension and health care obligations, the Big 3 could eventually face financial ruin if today's trends continue.

Bill Ford maintains the company is on track, and by sticking to basics such as cost cutting, it will return to health. He said he has begun to think about what kind of company Ford should be in several years, by which time Toyota Motor Corp. may be challenging Ford for its slot as the world's second largest automaker.

"No one gives up anything willingly, but I think we've seen in the past that being big isn't necessarily the best," he said about Ford's prospects of losing its ranking.

"I don't think you can manage for growth. I don't think you can manage for size. One of the discussions I'm having with our senior management group is what is the right profile for this company and what should the drivers be?"

Outside of Bill Ford, the only other Ford in the company's executive ranks is Elena Ford, the first fifth-generation family member to work there. Both say even if there's not a Ford in the executive ranks, the family will play some role.

The future may get a little stronger on June 16, when the one descendant of Henry Ford who can't make the celebration is due to give birth to No. 62.
 
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