News: Analysis & Commentary: DETROIT
FOR FORD, A GREAT TIME TO BE FLUSH
The cash-rich carmaker is plotting an acquisition strategy
There may be a liquidity crisis in some parts of the world, but not in Dearborn, Mich. Ford Motor Co. is sitting atop a $23 billion mountain of cash--a handy stash when there are some well-priced prizes to be had. All that cash--nearly twice its pile three years ago--"gives us a lot of options," boasts Ford Chief Executive-designate Jacques A. Nasser. And he and the company's new chairman, William Clay Ford Jr., plan to exercise some.
That should make Wall Street happy. Analysts say the company can afford to spend $4 billion to $5 billion and still have plenty left over to weather the next downturn, particularly since Nasser has slashed costs by $5 billion since 1996. Even deducting debt, Ford has an imposing $13.1 billion in net cash. On Oct. 1, Ford shared a sliver with investors by upping the quarterly dividend 9.5%.
But Nasser and Ford have much bigger plans. The first: a renewed bid for Korea's Kia Motors Corp. On Oct. 12, Ford resumed bidding for Kia after creditors agreed to reduce the amount of Kia's $9.5 billion debt that must be assumed. Ford, anxious to boost its paltry 1% Asian share, is bidding against Korea's Hyundai Motor, Daewoo Motor, and Samsung Motor, with a winner to be selected Oct. 19. Ford's balance sheet and accelerating earnings--profits climbed 10% in the third quarter, to $1 billion--make it a serious contender.
Wall Street would like to see Ford set its sights higher. The real trophy: a luxury European auto maker. Chrysler Corp.'s pending merger with Daimler Benz is the new global automotive model. "Ford might want to mimic their brethren at Chrysler and hook up with BMW or Volvo," says Merrill Lynch & Co. auto analyst Nick Lobaccaro. BMW and others insist they are not for sale, but Ford executives rule out nothing. Says Nasser: "We never say never."
For now, Nasser and Bill Ford Jr. seem almost giddy. Says Ford: "It's nice to have the flexibility to chart your own future." With global economic turmoil cutting prices, there appears to be a foreign deal in Ford's future.By Keith Naughton in Dearborn