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US:Family stays in control, Ford insists

Family stays in control, Ford insists

Ownership won't change, he says



Bill Ford glared when asked whether his family could lose control of the company his great-grandfather Henry founded in 1903.

"I don't understand why that would ever have to happen," Ford said, cutting short an October TV interview in Beijing. "There's no reason to think that any change in ownership structure needs to take place."

The Fords, who command 40% of shareholder votes with just 3.75% of Ford Motor Co.'s shares outstanding, may be among the few people hanging on to that mantra.

Even CEO Alan Mulally, whom Ford recruited from the Boeing Co. in September, is hedging. He negotiated a severance payment that could total $15.4 million plus options on 3 million Ford shares if the Fords lose control within five years, according to a U.S. Securities and Exchange Commission filing.

Under that scenario, Mulally's 3.6 million stock options and restricted stock units would vest immediately, and he'd receive a payment equal to twice his annual base salary and targeted bonus, the filing said.

Rather than give up power, the Fords are making the biggest collective gamble of their lives: They're putting their dynasty in hock.

In late November and early December, they negotiated $23.4 billion in bank loans and bonds convertible to shares to close 16 North American factories and eliminate 40,000 jobs. The company pledged a dozen U.S. factories, its 100% stake in the Ford Motor Credit consumer finance unit and its blue oval logo as collateral.

Saying 'No' to Ghosn

Mulally, 61, plans to spend $17 billion by 2009 to reduce costs enough for Ford to prosper as a smaller company. He expects the Ford, Lincoln and Mercury brands' market share to drop to as low as 14% of U.S. sales in the next few years compared with 16.5% through November.

"If Mulally fails, then the family will have to consider all options, including giving up the company," said John Casesa, managing partner of New York-based Casesa Strategic Advisors LLC and a former Merrill Lynch & Co. analyst.

The Fords didn't just bet the house on Mulally -- they also rejected an option that would have diluted their grip.

In July, Carlos Ghosn, CEO of Nissan Motor Co. and Renault SA, proposed an equity alliance if the Fords would abandon their dual-share structure, people familiar with the matter say.

The Fords said no, telling Ghosn, 52, they weren't ready to step aside yet.

Toyota Motor Corp. and Volkswagen AG are steering clear of joint ventures and technology-sharing agreements with Ford for similar family-ownership concerns, one of these people said.

"Many alliances take up time, management attention and energy," Ford spokesman Jon Pepper said. "The added liquidity we're getting by borrowing money will help us focus on our main priority, which is fixing the business."

That leaves Bill Ford, 49, to salvage his eight-year reign as chairman.

During that time, the automaker earned a total of $2.3 billion, an amount dragged down by $6.99 billion in losses during the first three quarters of 2006.

Ford's results compare with $3.5 billion that Toyota earned in the third quarter of 2006 alone and $61 billion it earned during the eight-year span.

14-year low

Ford's common shares fell to their lowest price in 14 years in 2006: $6.06 on July 21. They sold for $7.50 on Dec. 28, down from a record $37.29 in April 1999.

The 81 Ford family members who gathered at the Henry Ford mansion in Dearborn during the company's centennial celebration in 2003 are hurting, too. Their Class B shares were valued at $487.5 million on Dec. 13, less than a quarter of the $2.25 billion when Bill Ford became chairman in 1999.

"The family has always taken the long view," Pepper said. "Its backing of the company during its crises in the past, especially during World War II and the 1980 recession, probably kept the company in business."

Once an icon of U.S. innovation and mass appeal, Ford is now corporate America's most visible example of how complacency can fester under dual-class share structures, said Nell Minow, editor at the Corporate Library, an independent research firm in Portland, Maine.

"The Fords have been slow to respond to global market forces because of this insulation," Minow said. "They have this sense of entitlement -- that the company always has been and always will be Ford."

Dan Genter, president of Los Angeles-based RNC Genter Capital Management, stopped buying Ford bonds in early 2006. He continues to own debt issued by GM's consumer finance unit.

"What is the possibility that third-, fourth- and fifth- generation members of these families are really qualified to run these companies?" asked Genter, whose fund holds $2.3 billion. "American corporate royalty is dead."

Many companies give up dual-class structures after two or three generations because families have siblings who disagree and want to sell their stock, said David Lewis, a University of Michigan business professor who has written six books on Ford.

Voting in unison

In contrast, the Fords maintain a trust through which they vote their 70.9 million Class B, or supervoting, shares in unison. They also have a fund to buy all Class B shares family members want to sell. Any Class B stock sold outside the family would become a common share with no extra voting power.

David Giroux, an analyst at Baltimore-based T. Rowe Price Group Inc., whose firm owns 11.3 million Ford shares, supports Ford's veto of Ghosn's alliance. Still, he said he wishes Bill Ford hadn't remained executive chairman after hiring Mulally.

"The best thing would be for the Ford family to step back a bit, with Bill Ford in a traditional board chairman role," Giroux said.

Bill Ford said he tries hard not to interfere with Mulally and talks with him every day by phone.

Kae Inoue in Tokyo, Jacqueline Simmons in Paris, Stephen Engle in Hong Kong and Eugene Tang in Beijing contributed to this report.

My first car was a 67 Mustang Coupe, 2nd one was a 67 Cougar XR-7, 3rd one was a 66 Mustang Coupe. Why did I get rid of these cars for ? I know why, because I'm stupid, stupid, stupid.

My next Ford.....
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