By on May 13, 2007

fordstockholdermeeting.jpgAt Thursday's annual Glass House Gang get-together, eight of ten shareholder proposals got the axe. The kyboshed suggestions include a mandate to disclose the identities of all execs collecting upwards of $500k, another giving 10 percent stakeholders the ability to call stockholder meetings, and a directive asking for a strategic plan for Ford’s future health care liabilities. The Ford family also fell under attack via a motion to remove their Class B stock “super- vetoing voting” powers.  It isn’t the first time that the Ford family’s control has come under shareholder scrutiny, but that plebiscite perished too, albeit by a smaller margin than ever before.

The proposal to terminate the Ford family supervoting shares– by recapitalizing all outstanding stock to one vote per share– won 27.4 percent of the vote (up from 22.9 percent in 2006). While The Mutiny on the Where's the Bounty? failed, clearly, the crew's not fully on board with the Board.  

The biggest backers of the Class B breakup: the California Public Employees’ Retirement System (CPERS).  With $79.6m invested, the institutional plutocrat carries some weight. CPERS spokesman Brad Pacheco told The Detroit News (DTN) that the Ford family’s veto power rendered shareholder meetings “undemocratic.” Pacheco figures reform would inflate shareholder value. The common stock holders aren’t the only voting members thinking this way.

If Pacheco is anxious to generate a little extra cash for his employers, imagine Ford family members’ anxiety. “The family” has watched the value of their collective interest in the all-American automaker descend from $2.25b to $578m in the last seven years. AND they won’t see a dividend payment until 2013 or until Ford pays off its $23.5b loan. Think about it: Ford paid out $130m in dividends in ’99. YOU try living like a multi-millionaire on a couple a mil or less a year.

It’s no wonder that “the Family” got together three weeks ago to listen to two of Wall Street’s hottest M&A (Mergers and Acquisitions) wiz kids: Joseph Perella and Peter Weinberg of Perella Weinberg Partners. The dynastic dealing duo discussed the Family’s megalomaniacal role as shareholders, and whether or not they should consider “losing” some of that control.

Sources close to the meeting (but not the caterers) suggest that Billy Boy’s big sis, Sheila Hamp, and family adviser Bruce Blythe, are hoping for some kind of RJR Nabisco-sized M&A to bolster the Class B’s value and render some respectable remuneration. Meanwhile, FoMoCo Chairman Billy Ford’s stock amongst the cash-flow deprived family continues to sink. 

Camp Hamp’s concerns were echoed by common stock holders at Thursday’s shareholder meeting. In the opening minutes, Billy Jr. was called a “failure and a loser” by a Ford retiree. Whether or not he’s the biggest loser, Billy Boy has the continued support of his cousin (Edsel B. Ford II) and father (William Clay Ford Sr.). Apparently, Elena Ford is ready to scoop up any familial stock sell offs, in an effort to keep it all in the family.

Given the current state of affairs, the family should put those M&A guys on speed dial. Fueled by Ford Sales Analyst George Pipas’ monthly recital of “this was a challenging month” and “it fell short of our expectations,” analysts are still advising their clients to sell Ford stock. They still suspect that the Ford turnaround will be nothing more than a cash intensive whirling dervish that will eventually leave The Blue Oval broken, busted and bankrupt.

April’s perfect storm– a housing funk, lethargic consumer spending and escalating summer gas prices– did nothing to lift the gloom. Even monolith ToMoCo took a hit, posting the smallest month-adjusted gains since August 2004. Back in Motown, Ford faired the worst. The family is facing yet another month where double digit decreases (-17 percent) in retail sales are plaguing their highly leveraged company.

On Friday, Standard and Poor’s (S&P) analysts told UK investors there was little possibility that they’d upgrade Ford’s investment rating– currently five notches below investment grade– anytime soon. Analyst Robert Schulz predicted that a general U.S. economic downturn of just 10 percent could create “severe complications” for the automaker, leading to default.   

In his first appearance in front of the shareholders, CEO Alan Mulally calmly faced the music. With Billy Boy at his side, Big Al attempted to pour oil on troubled waters with a combination of piercing glimpses into the obvious and vague promises. “We are not where we need to be, but we are making very good progress”.

The 79 Ford shareholders gathered at the Hotel du Pont will be forgiven their skepticism. If dropping another thirteen points worth of sales, relying on incentives and being on the Corporate Library’s “pay for failure list” is progress, where do you think Ford is headed?  Ford Family members are starting to figure it out.

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37 Comments on “Ford Death Watch 32: Taking Stock...”


  • avatar
    jerry weber

    Matthew, one just has to hope that some of the "fords" saw this coming and diversified. At least this is the advice that their peon employees would have been given as to having all your pension money in your own company's stock. As for those that didn't, join the rest of us and start living a new style, "attention K mart shopers". Kicking the can down the road with all those legacy costs and union work rules was fine when the pattern agreement said all car makers would have the same contract. However, the day honda opened a car plant in Ohio in the 70's, and made it through several union attempts to organize, a new "pattern" was set and this allowed everyone else in the World (Japanese, German, & Korean) to build here non-union. That one fact changed everything, and until the domestics are non-union they will never compete head on. If they can spot the foreign brands over $1500 per car and survive, Mullaly, rabid Rick, and all will be the new authors of the textbooks in business schools.

  • avatar
    starlightmica

    That 27.4% number actually represents half of Ford shareholders voted against the family as their supershares have 17 times as much weight as a regular one.

    The Ford family is reaping the fruits of their meddling with the executive ranks over the years. They must bear some responsibility for all that has become the debacle FoMoCo has become. Stripping away their power would be a good start.

  • avatar
    Matt51

    Jerry,
    I know all the problems and failures that have occurred.
    Drudge report today says fuel hit over 4.30 per gal in San Francisco.
    Domestic 2.5 built companies around what people wanted. Toyota et al were envious and planning large vehicles of their own, but still forced to build small economic vehicles for their home market.
    Honda locating in US is a positive. I agree.
    However $4 gas is the sledgehammer to break the US economy, car companies cannot get in the way of another Exxon-Mobil $41B annual profit (more than enough to buy the entire 2.5 outright)

  • avatar
    wsn

    I just don’t understand why would anyone invest in Ford. I mean, a company that loses money can be a potential turn around play. But one that has B-class shares 16 times the voting power is not worthy of investment. Disregarding all other factors, that alone makes the A shares 1/16 of what they ask for. Don’t they understand that the stocks are worth some money because of the voting power? Same with the Canadian company Bombardier; total piece of crap.

  • avatar
    wsn

    Replying to Matt51:

    However $4 gas is the sledgehammer to break the US economy, car companies cannot get in the way of another Exxon-Mobil $41B annual profit (more than enough to buy the entire 2.5 outright)

    No, $4 gas is not the sledgehammer to break the US economy. Europe has much higher price (double in some countries), and they are doing better than the US now.

    Keeping the gas price artificially low is problematic and unsustainable. If the gas hits $10, all the better. The US will not be much dependent on foreign oil, thus saving billion of military expenses. Both the federal budget and trade will leave the red ink territory. And you know what, eventually the US dollar can rebound and make all the imports more affordable. And yeah, privated companies will spend big amounts to research alternative energy, to build public transit and to emit less green house gases, voluntarily.

  • avatar
    quasimondo

    Is the European economy really doing that much better? Unemployment hovers around 10%. Economic growth has been stagnant. Wages have been flat. Political leaders who weren’t pushed out of office for their involvement in Iraq are being pushed out because things haven’t been so rosy at home. Don’t be fooled by the Euro’s rise against the dollar as an indicator of their economic wellbeing.

    Should gas hit $10/gal, the U.S. will still be dependent upon foreign oil, and it just won’t be Detroit that’s hurting because they can’t sell Suburbans and Expeditions. The federal budget will sink deeper into red ink from lost revenue because people can’t afford to buy anything (because everybody else will have to raise their prices to compensate for the increase in fuel prices), which will spur manufacturers to cut payrolls, which leads to the downward spiral.

    And no, private companies will not build public transit systems. The debacle that was the Seattle Monoral project is more than enough reason for any private company to stay out of the public transportation business unless the taxpayer opens up their purse strings (which might not be possible if they’re paying 2.5 times as much to keep their house warm and have enough gas to get to work)

  • avatar
    rtz

    GM(Volt) and Hyundai(rear wheel drive) each have some hot product on the drawing board. What’s Ford got? Not that boxy minivan(Flex).

  • avatar
    negativeland

    @ Jerry Weber: yeah sure, union are the only one to blame. I didn’t know they are so powerful that they can dictate the Fords to put out bad products with low quality

  • avatar

    Wsn, I beg to differ, not taxing the living shit out of gas is not keeping gas prices artificially low. It may or may not be good policy to tax the living shit out of gas like Europeans but our lower prices are not artificial prices, the higher European gas prices are artificial.

  • avatar
    Rastus

    It’s pretty telling how the one moniker “Ford- Found on Road, Dead” not only held true 30 years ago, but is now taking on an even greater meaning.

    Yes, Ford Motor Company just may wind up dead. In which case, I can’t any tears.

    As far as the Ford family losing 3/4 of their value…imagine just how much “value” their customers had to pay. Blown head gaskets, new transmissions, etc….the customer has paid dearly.

    Oh well, such is life. It looks like Hyundai is feasting on Ford’s carcass. The circle of life continues.

    Goodbye Ford. I can’t say that I’ll miss you one iota.

  • avatar

    If Ford goes under there will be a certain kind of justice that would be lacking from such an event befalling GM. Henry Ford II fired Lee Iaccoca because he felt threatened. The Ford family wanted to run the show well you got your wish.

    Its too bad that those prior GM managers won’t suffer one bit from their arrogance and stupidity.

  • avatar
    DearS

    Ford goes under, oh well, that ends well. It seems that quite a bit of arrogance/ignorance/greed goes all the way to the top. Its like a chicken with its head cut off, literally. Am I to pray the economy doesn’t crash, while at the helm of loonies. I think not, let the times roll. Reform is the only way to go, and a crash might just be the best place to start, or not. Either way, its best not to take them seriously, lets let go, and observe things taking their course. Perhaps will learn something to afford ourselves some peace and joy, and more impartial to the state of the world.

  • avatar
    Martin Schwoerer

    quasimondo:

    The EU is in a good position in the economic cycle right now, but reforms have also led to a general improvement.

    “Spring economic forecast 2007-2008: unemployment and public accounts to improve further as growth stays solid. The European Union economy is expected to grow by 2.9% in 2007 and 2.7% in 2008 (2.6% and 2.5%, respectively, in the euro area) on the back of solid investment and stronger private consumption, according to the Commission’s spring economic forecasts. The EU as a whole is predicted to create almost 9 million new jobs over the period 2006-2008, 6 million of which for the euro area alone. This will help to reduce EU unemployment to less than 7% in 2008 from 8¾% in 2005. The economic recovery will continue to improve public finances, with the general government deficit forecast to fall to around 1% in both the EU and the euro area – a level not seen in many years.”
    Source: http://europa.eu

  • avatar
    troonbop

    There does seem to be a kind of justice to this one.

  • avatar
    SunnyvaleCA

    Gasoline isn’t really $4.30 in San Francisco. Perhaps high octane, full-service at one station is that high, but the general price for regular self-serve is about $3.62. http://www.fuelgaugereport.com/CAmetro.asp

    As for the USA’s ability to handle high fuel prices relative to Europe (and Japan), I think the USA will be at a significant disadvantage. The nation has spent the last 30 years with low prices, and that has promoted a fuel-intensive lifestyle: long commutes through suburban sprawl, inefficient vehicles, huge houses that aren’t well insulated, entire cities in 105-degree deserts needing year-round air conditioning, etc. About the only big befit the USA enjoys is a large amount of natural resources per person; that advantage, too, is eroding quickly as the population continues to grow exponentially over time.

  • avatar
    jerry weber

    negativeland: You miss one point. my thesis is that one part of an industry cannot be union and another non-union forever. That the union didn’t organize the transplants here and that was there undoing. The huge legacy costs for the domestics have to do with medicare and in most European union Countries: France, England, Germany,and even Canada, the medical costs are born by the goverment. What we have is a perfect storm for GM FORD & CHRYSLER. The playing field isn’t level and in our free economy, I don’t see how it gets there.

  • avatar
    Terry Parkhurst

    The wrong Ford was given the reins. Edsel Ford II, who is an automotive enthusiast who helped promote the Mustang 5-0, when it first came out in the early Eighties, would have been a much better person to attempt to bring Ford into the 21st century.

    But no man, no person, is a miracle worker. There’s a bunch of things going on with the global economy, and sadly, Ford’s time as an auto maker, at least within the United States, may indeed be coming to an end.

    That almost happened in the early Eighties and the Taurus turned that around in 1985. Today, they need a new “Taurus,” so to speak, and not just a name slapped on the 500.

    For what it is worth, I think they need to bring some of those Fords over here that the Aussies get – and build the Ford Falcon (concept) wagon.

  • avatar
    Luther

    “They still suspect that the Ford turnaround will be nothing more than a cash intensive whirling dervish that will eventually leave The Blue Oval broken, busted and bankrupt.”

    Ford will have a hard time just covering the interest payment on that 23.5B loan even if they can turn the company around in NA. A turn around in the US will require much lower profit margins per vehicle since competition in Ford’s most profitable segments is heating up…Not to mention the repeal of the 25% tariff on imported trucks.

    Ford should concentrate on profitable markets outside the US and move production to more business-friendly regions that uphold property rights. Why burn *large* sums of precious capital dicking around in the US when every market outside NA is profitable? I would concentrate on India, China, Middle-East, Europe, Russia, and South America.

  • avatar
    wstansfi

    Matthew,
    Here’s my question for you:
    In an economic downturn, don’t discount brands tend to do better relative to the total economy? For example, if the economy tanks, restaurants suffer, but supermarkets thrive… Luxury brands like Sacs 5th Ave suffer, discounters like K-Mart and Walmart get pumped…
    So, don’t you think Ford might turn around more quickly (or actually survive) if the economy were to tank?
    Cheers!

  • avatar
    50merc

    It is indeed a dire time for Ford. The only good thing I can see coming out of a collapse is that maybe some insiders will write fascinating “tell all” books about the Board meetings and executive staff conferences where fateful decisions were made/not made. Currently the 2.5’s HQs enjoy more secrecy than the CIA.

    Of all the blunders the 2.5 made, I think the most serious was converting a variable expense, direct labor, into a fixed cost. The auto industry is a cyclical business, but the UAW contract made layoffs difficult and expensive. So for too long the 2.5 kept running unneeded factories and non-competitive in-house sourcing of parts.

    And while market share and profits declined, the number of retirees and burden of handsome pensions and lavish health insurance steadily grew. As did expectations of the recipients. I suspect that Mullaly privately fully recognizes that bankruptcy is looming. But does the UAW? Once my wife was in her OB/GYN’s waiting room and heard a conversation between two women sitting nearby. One woman said she and her husband decided to have another child because he worked at the GM assembly plant and having a baby “would be free.” Free? Not to GM.

  • avatar
    ihatetrees

    RE: 50merc’s comment:

    Of all the blunders the 2.5 made, I think the most serious was converting a variable expense, direct labor, into a fixed cost. The auto industry is a cyclical business, but the UAW contract made layoffs difficult and expensive. So for too long the 2.5 kept running unneeded factories and non-competitive in-house sourcing of parts.

    I think Brock Yates did a piece 8+ years ago regarding Detroit’s irrational sales and production strategies that were necessary to keep the factories going. He wondered how long it could continue – now we know. The wheels are about to come off.

    HOWEVER, from my vantage point in UAW-land, I’m really not sure WHAT management could have done. Provoking a strike late last decade or early this decade would have just resulted in a quicker filing. (GM actually had a few wildcat strikes in the late ’90s which they had to settle to keep things running.)

    But does anyone here think the judicial/law-enforcement system in Michigan (or Ohio/Indiana/Upstate NY/PA) would have allowed GM or Ford to move factories or hire replacement workers (without them getting shivved)?!?!!) During the last contract with W and a GOP congress it MAY have been possible with gutsy leadership.

    Look at the airline companies. Non-flexible unions KILL companies that face non-union competition. It happens all the time. I don’t think there was a solution to this.

  • avatar
    guyincognito

    This situation is entirely the fault of the Ford family. Yes, the union made demands but who pays the bills? The fact is that there is no one standing up for reason at Ford. What would have been worse, staring down a strike 10, 15 years ago or this? The Ford family decided to collect rather than be proactive. Bill Ford took the helm and couldn’t even exert his will on his own company. Why bother holding this super voting power when they use it for nothing? Years upon years of shitty products and shitty contracts have been built and this is what they have wraught. They are all losers.

  • avatar
    jthorner

    As I have said before, study what became of the UK based auto industry from 1960 through 1990 to see a pretty good preview of what is going on in the US now.

    Ford’s one advantage visa-vis GM right now is that they don’t have near the brand and nameplate proliferation problem. Mercury hardly counts since none of the Mercury products have unique sheetmetal or powertrains. Current Mercury products are simply trim-package options on Ford products. GM is trying to put out unique products for Chevy, Buick, Pontiac & Saturn and it simply isn’t working.

    Ford’s relationships with Volvo, Jaguar, Land Rover and Mazda are certainly in better shape than GM’s with Saab, Fiat, Isuzu and Subaru . At least Ford’s Premier Group assets are saleable businesses as is the Mazda stake.

    Reports are that Cerberus is close to a deal to buy Chrysler from Daimler. Perhaps this is the first step in a major restructuring of the US auto industry, which even with all the noise hasn’t happened yet. Look for the Ford family to see the value of their shares go down a lot more, perhaps to zero. Of course so what, not a one of them worked for it. They are living off the momentum of generations long dead.

  • avatar
    starlightmica

    Cerberus buys Chrysler (TBA). Is the Suicide Watch over, or does the counter merely get reset? They already owns National & Alamo car rental, 51% of GMAC, and a controlling interest in Delphi (if the details can be worked out).

    I guess the new Detroit 3 are GM, Ford, and Cerberus for the time being until Chrysler gets parted out.

  • avatar
    jerry weber

    With chrysler going to a venture capital company, we are seeing the opening shots in a consolidation scenario. I see there only being one or two domestic builders left. Cerebus will not hang around for ten years like Daimler pouring money into chrysler. Ford cannot stay where they are. Does ford cut mercury and buy jeep and chrysler vans? Does magna take chrysler convertables and dodge trucks? Do ford and gm combine with the best of chrysler? Some new ideas must come from all of this as money cannot be made using the present templates at any of the old big three builders.

  • avatar
    SherbornSean

    Jerry,
    Good point. The thing that has kept Ford alive the last 30 years is the fact that GM and Chrysler were also poorly managed. Now that Chrysler is in the hands of rational managment, and with GM showing signs of decent judgement, the pressure is really on Ford.

    There are entire product categories Ford could exit — at least from an engineering perspective — where they show little expertise. Like minivans, small pickups, small cars, powertrains, luxury anything,…

    I’m not sure what’s left. The Camaro and Challenger crowd the market for middle aged men looking to revive a childhood they never had, and the livery companies are starting to catch on to Chargers and Odysseys.

  • avatar
    postjosh

    i don’t really get all the negativity on this site about ford. it’s a given that these are tough times for detroit. we all know that ford’s market share slide isn’t over. but, sooner or later the unions will make a deal and the situation will stabilize. meanwhile, am i the only one who reads this site who believes that ford builds a better car than the gm or chrysler? fusion, edge, escape hybrid & f150 are all class leaders. there is room for a large domestic automaker and ford is the most likely candidate for survival.

  • avatar
    starlightmica

    postjosh:
    fusion, edge, escape hybrid & f150 are all class leaders.

    TTAC’s not Consumer Reports, but I doubt you’ll get a flood of commentors agreeing with you there.

  • avatar
    Sid Vicious

    My 2000 F150 was a class leading POS – absolutely fell apart and rusted to pieces within 30,000 pampered miles. Traded it for a Toyota. I feel sorry for the poor sap who bought that thing.

    Yeah – I know. That’s ancient history. I’m sure the new trucks are much better. Except for the highway speed vibration that can’t be fixed, and spark plugs that can’t be removed, and the fact that they porked it out by 400 lbs. or so, etc.

    This ain’t au revoir, Ford. It’s goodbye.

  • avatar
    guyincognito

    I think that the Fusion, Edge, Escape, F-150, Explorer, Expedition and even the 500 I mean Taurus are good products. Unfortunately they are offering significantly less (if any) profit per vehicle than Ford’s previous bread and butter. And the fact is that these products are not the home runs Ford needs to be putting out right now. Can Ford cut its way down to an operating cost in line with its revenue while simultaneously stabilizing that revenue before chapter 11? Without significant reductions in their skyrocketing pension/healthcare costs, big concessions from the Union, and a markedly faster than usual refresh of the entire lineup it aint gonna happen.

  • avatar
    negativeland

    @Jerry Weber: I agree with you on that, but I think that unions are more than ever needed and that “union bashing” won’t solve the problem.

    And I tend to forget that unions in the USA are quite different from the europeans one…

    But I still think that if Ford had better products (and it seems that in Europe they are already better than the US ones), a better management and a long-term view there would be no need for a death watch.

    Anyway, as you wrote, some new ideas must come from all of this…

  • avatar
    SherbornSean

    postjosh,
    I won’t dispute whether the vehicles you mention are best in class. I would certainly grant that Ford makes several good vehicles. The issue is that even with decent product, Ford as a corporation is in a tailspin.

    Ford has already sold off most of the corporate jewels and mortgaged remaining assets. You can’t continue to eat cash forever.

  • avatar
    hltguy

    Unfortunately for Ford, the US economy is slowing down, and appears to be headed for a possible recession. The fuel price increase is probably not a short term situation, neither is the housing slowdown. While the US goverment continues to take in record tax revenues, the politicians continue to spend all of it and more, not to mention the $15 billion dollars a month and more the wars in Iraq and Afhanistan cost. So what does Ford do in this scenario? They borrow 23 billion putting everything they own for ransom as collateral. Does any reasonable person actually think they can pay that loan back? Even the interest on it? They don’t have any product in the pipeline that can turn the mess around, while their existing product line ages. FoMoCo missed its opportunities years ago when they were making big profits, to position themselves for the long haul. They squandered their riches, they will not get another opportunity to be cash flush (without massive debt) again, unless perhaps a BK can save them.

  • avatar
    jurisb

    Mullaly, for the bonuses you get annually , your company could prepare at least a couple of concepts for NAIAS, for starving units like mercury.
    Have you all guys noticed that all american car companies have the same problems and have the same way of manufacturing. all brands within each of 2.5 use foreign platforms, borrrowed engines etc. does it tell you something? all of them agonize now, because the much needed oxygen ( PRODUCTS) is missing.If years ago people bought fords even if they were low quality lacklusters, but they stiil looked juicy and interesting. then today ford puts a new line of vehicles that has mostly japanese components, french reliability, and german- boring design. sure, customers run away. looks like unbelievably heavy discounting and rebates is the final bite for the last unaware clients.

  • avatar
    jurisb

    P.S.by the way a hyphen between `all` and `american` is a taboo. :))))))))))))))

  • avatar
    hal

    "Ford family said to consider partial sale of ailing automaker" http://www.iht.com/articles/2007/05/14/business/bxford.php Moneyquote: "The younger Fords don't believe the family should be so involved in managing the company since it leads to bad decisions,"

  • avatar
    peterbrown77

    Feeling stupid?

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