Filed under: Ford, Mazda, Earnings/Financials, Rumormill
Ford may be considering sale of Mazda stake
The financial peril that currently faces the U.S. domestic automakers is no secret, and according to Wall Street Journal report published yesterday, Ford is mulling over the possibility of unloading at least part of its controlling stake in Mazda to raise cash. Japanese media, via the AP, said that Ford would likely keep some interests in the Japanese automaker after such a move -- no surprise when you consider how closely tied Ford and Madza are right now in terms of shared technology. The Oval's third-quarter numbers are expected to be pretty ugly, and the Journal's source said that the potential sale of its Mazda holdings is one of many moves reportedly under consideration as Dearborn looks for ways to add to its cash on hand. For its part, Mazda denies that any decision has been made (a non-denial, really -- no outlets reported that a deal had yet been completed) and Ford weighed in with a to-be-expected "no comment." As they say, to be continued...
[Sources: The Wall Street Journal, AP]
Reader Comments (Page 1 of 3)
Avinash machado 11:16AM (10/12/2008)
Well if they really are planning to sell, then they are likely dumber than many thought. Selling off to get short term benefits is of no real use.
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Sandok 11:42AM (10/12/2008)
No, you're the dumb one. A company needs money to survive, especially in the short term.
Image assets as food (longterm) and cash as air (short term).
You can survive without food for a while but without air, you'll die straight away. Economics 101.
pmiddle5 12:33PM (10/12/2008)
Thinking short term is why Ford is in this current problem...
Ayatollah Rodriguez 1:24PM (10/12/2008)
I agree with Avinash, it is a dumb move, what Ford needs to do is two things. One is for ultra short term (until the end of the year), the second is medium short term-long term.
First, issue Short term bonds, 6 month bonds at very, very good rates. IBM did so last week, sure IBM has great credit rating but they did issue bonds at a very favorable rates, Ford needs to give even higher rates. Step number two is.............look let's not beat around the bush here, we all know that Ford, GM and Chrysler OWN a number of politicians (Dingel, Levin and others) Bush administration has been nothing but business lap dog. What they need to do is to put pressure on the Energy department and "ask" them to release those 25 Billions in loans that Congress approved. Some speculate right now that energy department needs to study this issue and that it may take a year or two until loans will actually go to automakers. They need to press on Energy department hard enough to release at least 5 Billion right now and the rest after they study the issue. This should easily give Ford enough cash until 2010 when a few new models should hit the street.
Selling Mazda is not the answer because if Mazda 3 got a few more MPGs and was sold with a few more standard features it could have given Civic and Corolla some real competition. People need to stop panicking, and do stupid things like merging with a company that sells exactly the same thing you do.
Lee Gibson 1:58PM (10/12/2008)
Sandok, Mazda is Ford's engineering department. If Ford thinks that they can do without that, I think people would be unwise to keep their stock.
Robert 2:04PM (10/12/2008)
Clearly we don't understand what this gets for Ford.
First, selling off Mazda does not mean losing its R&D collaboration. If that were severed, it would kill Mazda as well. Ford would be selling off its stake with the hopes of raising maybe $500-750M to cover employee separations it will need in 2009. The income from Mazda's operations peaked in 2007, I believe, at about $400M. It's going to be much smaller this year and probably non-existent next year. In the long run, it will definitely return to that inflation-adjusted $400M level, but the money Ford would have gained by investing the cash from the stake sale would MORE than cover any lost revenue at that point. Ford should also be profitable without Mazda's income by 2010, so it won't need a little extra floatation device to keep its head above water.
As for selling bonds, let's revisit what a credit crunch is. No one will buy your debt, especially Ford's debt, right now. And even if they did, the interest on those bonds would be almost cripplingly high - probably north of 12%!
So let's recap.
1) Ford sells stake and gets $750M short-term cash instead of making $750M off of Mazda over the next 3-4 years. That $750M helps with employee separations both in the U.S. and EU that save Ford $1.5-2B worldwide.
2) Despite the sale, R&D collaboration continues because at the moment, neither company can survive without the other - especially Mazda whose size wouldn't support its current number of platforms. The only thing this allows is for Mazda to pursue projects and partnerships outside of Ford knowing.
REALITYCHECK 7:58PM (10/12/2008)
I doubt that they can sell off Mazda and raise any cash, since they have pledged everything to the banks and the stock from Mazda was at the top of the list. Also at this point every new car that Ford has going is based on shared platforms and all of Mazda's v6 engines are from Ford. But I am sure that either Honda or Toyota would love to give them one of theirs after they buy the stock. It would make much more sense to sell Volvo if short term cash is what they need, but once again I am sure the banks have first dibs.......
Zach 5:13AM (10/13/2008)
@ Lee Gibson
Mazda is Ford's engineering?
How come I'm sitting in a Ford building with about 200 Ford engineers?
Mobius_1 11:21AM (10/12/2008)
Ford should sell off its worst loss making divisions such as Ford... oh wait...
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ZingKingX 11:29AM (10/12/2008)
HAHAHA!
Fix It Again Tony.....
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Amien 11:30AM (10/12/2008)
I think i kinda tipped in for this one.
Ford's stake may go to Sumitomo, some speculation is that TATA might be interested in buying it as well.
Regardless of the transfer, Ford and Mazda will still share tech.
Mazda saves over $90 million in R&D thanks to Ford, but benefits to Ford are several times greater.
I think Mazda's a very very under-rated automaker. Mazda's awesomeness+Ford's R&D support+ TATA's money, that is something i would like to see. :)
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Kitko 12:27PM (10/12/2008)
I'd like to see the source for $90 million. I don't doubt it, I just want to see the source. I agree that it's Ford that needs Mazda not vice versa and EVERY manufacturer would be lucky to have Mazda in the family.
Amien 12:50PM (10/12/2008)
Sure, here you go:-
http://www.businessweek.com/globalbiz/blog/eyeonasia/archives/2008/10/ford_to_sell_ma.html
Amien 12:55PM (10/12/2008)
Wanted to add that their own source is Credit Suisse.
Those figures are annual, BTW.
Landy 11:31AM (10/12/2008)
OK - next month they are going to sell Volvo to get the shelf finally empty. But what then???
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Sid 11:59AM (10/12/2008)
If there is ONE company that Ford needs to survive, it is Mazda. They should unload Lincoln/Mercury and even parts of Ford Motors itself before they do the same with Mazda. However, having TATA control part of it would be not such a bad thing at all! If TATA doesn't touch Mazda operations itself but simply invests in the company and in turn borrows its hardware and platform, everyone wins.
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hatchbacks are cool 12:16PM (10/12/2008)
Yes in the USA for the moment .
Hamud 12:05PM (10/12/2008)
That would be a dumb move.
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Galley 12:11PM (10/12/2008)
The way it's going, all auto makers will soon be out of business, and we'll all be riding bikes.
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rsfourever 12:11PM (10/12/2008)
i truly think that Mazda is the best thing ford has going for it at this time - they should do everything in their power to avoid getting rid of Mazda. Unless of course, they need money right away, in which case the more valuable mazda is, the better, because they can get more money for it...
hopefully, they'll find a way to keep mazda AND volvo, and over time, increase their stake in mazda to make it a wholly owned subsidiary.
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