Ford May Sell Luxury Brands to Ex-Chief, People Say (Update3)
By Doron Levin and John Lippert
Aug. 25 (Bloomberg) -- Ford Motor Co., restructuring after a $1.44 billion first-half loss, may sell some luxury-auto brands to an investment group led by former Chief Executive Officer Jacques Nasser, four people familiar with the discussions said.
The talks focus on Jaguar and Land Rover, said one of the people, who didn't want to be identified because the negotiations are private. The discussions are with JPMorgan Chase & Co.'s One Equity Partners LLC, where Nasser is senior partner for mergers and acquisition, the people said.
Nasser, fired by Ford five years ago, created the company's Premier Automotive Group, including European brands Jaguar, Land Rover and Volvo. As late as 2004, Ford was counting on the group to generate one-third of its automotive profit by 2006. Ford says Premier will lose money this year.
``The people at Ford are feeling highly vulnerable right now, and when you feel vulnerable, you put everything on the table,'' said David Cole, chairman of the Center for Automotive Research in Ann Arbor, Michigan.
Ford, the world's third-largest automaker, has said it's considering a range of options after losing money in seven of the last eight quarters in North America, its biggest market. On Aug. 2, the carmaker hired former Goldman Sachs Group Inc. mergers- and-acquisition specialist Kenneth Leet as a strategic adviser.
Rubin Resigns
Today, the automaker announced the resignation of board member Robert Rubin, chairman of Citigroup Inc. and a Ford director for six years. In a letter to Chief Executive Officer William Clay Ford Jr., he cited potential conflicts of interests because Ford is considering the sale of assets and Citigroup has a ``multi-faceted relationship'' with Ford.
Jamie Rubin, Robert Rubin's son, is a One Equity partner. Oscar Suris, a spokesman at Ford's headquarters in Dearborn, Michigan, wouldn't comment beyond Rubin's resignation letter.
The talks with Nasser, which could result in a joint venture rather than an outright acquisition, don't involve Volvo, one of the people said. The people wouldn't say whether the discussions have advanced beyond a preliminary stage.
The conversations are cordial, partly because Nasser, 58, has been on good terms with his successor as CEO, Bill Ford, 49, one person said.
Brooke Harlow, a spokeswoman for New York-based One Equity, declined to comment. Ford spokesman Suris also declined to comment on the talks.
Shares Rise
Shares of Ford rose 28 cents, or $3.61, to $8.04 at 10:05 a.m. in New York Stock Exchange composite trading. The stock was up 0.5 percent for the year through yesterday after trading at 14-year lows a month ago.
Nasser was Ford's CEO from 1999 to 2001. He led the acquisition of Volvo AB's car unit for $6.5 billion in 1999, and Bayerische Motoren Werke AG's Land Rover unit for $2.7 billion in 2000.
Nasser's clout faded during a controversy over Firestone tires. In 2001, the U.S. Department of Transportation investigated at least 271 deaths involving tire tread separations, mostly on Ford Explorer sport-utility vehicles.
When he ousted Nasser in October 2001, Bill Ford told reporters, ``We lost our focus in several areas -- some of it might have been strategy, some of it might have been Firestone.'' At the time, Ford was in the midst of four consecutive quarterly losses.
In 2002, Nasser led One Equity Partners' $238 million acquisition of bankrupt Polaroid Corp., the pioneer of instant photography. He sold Polaroid to Petters Group Worldwide, which owns on-line auctioneer uBid.com, for about $426 million last year.
The talks with Nasser come as Ford loses U.S. market share for the 11th consecutive year, a streak that began when Nasser was in charge of product development.
Premier's Loss
The automaker last week said it will cut North American production 21 percent in the fourth quarter, in part because of tumbling sales of the profitable F-Series pickup, the nation's best-selling vehicle.
The Premier group had a pretax loss of $162 million in the second quarter, compared with a year-earlier profit of $17 million. In December, Ford said it would invest $2.3 billion in Jaguar to help pay for a reorganization. Ford acquired Jaguar in 1989 for $2.5 billion.
Ford doesn't specify profit by brand. The company said in January that all the Premier brands except Jaguar made money last year.
During the first seven months of 2006, U.S. sales of Jaguar, Land Rover and Volvo totaled 109,612 vehicles, or 7.7 percent of Ford's total sales of 1.4 million units, according to Autodata Corp. Premier's Aston Martin unit sold an additional 259 cars, according to an Automotive News estimate.
The Financial Times reported yesterday that Anthony Bamford, chairman of closely held JC Bamford Excavators Ltd., said he'd like to buy Jaguar but hasn't approached anyone at Ford.
Going Private
The Ford family also has considered taking the carmaker private, people familiar with the situation said. For now, the family views ending 50 years of public ownership a last resort, one of the people said. Discussion of the possibility of going private was reported yesterday by USA Today, which cited an unidentified source.
The Fords' preferred move would be a partnership bringing Carlos Ghosn, chief executive of Nissan Motor Co. and Renault SA, into a leadership position in the company, said one of the people, who didn't want to be identified because the deliberations are confidential.
Ford spokesman Tom Hoyt declined to comment.
Wooing Ghosn
Last month, Bill Ford told Ghosn he would like to explore an alliance if Ghosn fails to team up with General Motors Corp., according to people familiar with the conversation. Ghosn said he wouldn't talk to Ford before his discussions with GM conclude in mid-October, the people said.
Under an arrangement created when the company went public in 1956, Ford family members control 40 percent of shareholder votes through Class B shares that they've agreed to sell only to each other.
Ford's 7.45 note due in July 2031 rose half a cent to 77.5 cents on the dollar, yielding 9.9 percent, according to Trace, the NASD's bond-price reporting service.
The perceived risk of holding debt in euros sold by Ford's finance unit Ford Motor Credit Co. fell 0.55 percent today in the credit-default swap market. Credit-default swaps are financial instruments based on corporate bonds and loans that are used to speculate on an increase or decrease in credit quality.
Ford Credit's credit-default swaps fell to 358,750 euros from 360,750 euros, Bloomberg data show. Investors who buy the contracts are paid 10 million euros should the company default in the next five years.
To contact the reporters on this story: Doron Levin in Southfield, Michigan, at [email protected] ; John Lippert in Southfield, Michigan, at [email protected] .
