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Old 04-22-2005, 05:12   #1 (permalink)
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US:Chairman says firm may sell off Hertz to get cash

Chairman says firm may sell off Hertz to get cash

BY SARAH A. WEBSTER
FREE PRESS BUSINESS WRITER

Ford Motor Co. held out the prospect on Wednesday that it might sell its profitable car-rental business, the New Jersey-based Hertz Corp. -- a move that could generate a lot of cash to improve the automaker's balance sheet.

Hertz, which also rents trucks and equipment, earned just under $500 million in pretax profit last year and about $33 million in the first quarter of 2005, up $40 million from a year ago, Ford Chairman and Chief Executive Officer Bill Ford said in a conference call.

But with rest of this year expected to be fiercely competitive for Ford Motor, and the likelihood of a loss in the second quarter, Bill Ford acknowledged that the company was exploring whether to change its relationship with Hertz. That could mean selling it outright, selling part of the company or some other new arrangement.

The idea seemed to generate a lot of interest by industry analysts on a conference call with Ford.

"Hertz is a great, well-managed business, and as a result of their strong performance and our continued de-emphasis of selling vehicles to the daily rental companies, we are beginning to evaluate long-term strategic objectives for Hertz," Bill Ford said during the call.

"We can't share all of our plans with you today," he said, "but we can tell you that we have plans and we'll be rolling out our plans to you as it makes sense over the next several months."

According to John Casesa, who studies the industry for investors at the brokerage Merrill Lynch, Ford Motor remains highly liquid, with enough cash on hand to cover expenses, despite having $700 million less in cash now than it had at the end of 2004. Ford had $22.9 billion in gross automotive cash at the end of the first quarter.

Still, industry experts have been suggesting for some time that Hertz is an asset that Ford could rely on to generate cash in tough times.

"We expect Ford to sell Hertz once it deems market conditions attractive," Casesa said in a report last fall.

Also in a report last year, the credit rating agency Standard & Poor's listed "the potential for Ford to monetize its investment" in Hertz as a key aspect of Ford's financial flexibility.

During repeated questioning about Hertz, Bill Ford said no decisions have been made about what do with the subsidiary.

"The market's pretty buoyant right now, Hertz is doing well, and it's probably the right time to take a look at it," he said. "I think the best thing for us to say right now is just to repeat what we said. We're evaluating our strategic options with Hertz and let it go at that. ... We haven't decided what the best route to go is."

Hertz and Ford Motor have had a close relationship since Walter L. Jacobs founded a car-rental business in 1918 with a dozen Model T's. The company later known as Hertz has had a variety of owners over the years, including General Motors Corp.

But in 1987, Hertz was sold to Park Ridge Corp., a company formed by Ford Motor and Hertz senior management for the purpose of taking over Hertz. In 1993, Park Ridge merged into Hertz, and a year later, Hertz became a wholly owned subsidiary of Ford.

Hertz began trading on the New York Stock Exchange in 1997, when Ford sold 20 percent of its stake to the public. But Hertz became a wholly owned subsidiary of Ford again when Ford reacquired the outstanding shares in 2001.
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