Ford Death Watch 32: Taking Stock
At 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- [s]vetoing[/s] 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.
Hal on May 15, 2007
"Ford family said to consider partial sale of ailing automaker"
Moneyquote: "The younger Fords don't believe the family should be so involved in managing the company since it leads to bad decisions,"
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