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Ford May Lose Some Investors to GM IPO

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On: Tue, Aug 24, 2010 at 9:52AM | By: Sherry Christiansen


Ford May Lose Some Investors to GM IPO

According to the Bloomberg News, Ford Motor Co. Executive Chairman, Bill Ford recently commented that some of the company’s investors may liquidate their holdings in order to buy shares in General Motors Co’s IPO with the strategy in mind of distributing the risk throughout the automotive industry.

“Some money will be rebalanced into GM, but look: our company and GM ultimately are going to succeed or not based upon performance,” according to Ford's statement to reporters at an event in Detroit. “It doesn’t make any difference to me where our shares are or their shares are on any given day.”

As GM prepares for its initial public offering after bankruptcy, many analysts are predicting an offering of up to $16 billion.

The U.S. Treasury currently owns as much as 61% of GM. The share sale will allow the company to decrease the government’s ownership share while making a comeback to public market. Ford Motor Co. was the only Detroit automaker of the big three that didn’t take a government bailout or file bankruptcy by borrowing $23 billion. Alan Mulally, Ford CEO stated that the company is at a disadvantage in the marketplace due to having such a huge financial loan obligation.

So far this year, Ford has been able to stay ahead of its loan payment schedule due to this year's earnings at $4.7 billion in the first 6 months of 2010. Ford’s success this year is largely attributed to the redesign of the Taurus and Fusion, resulting in a 23% increase in sales this year (as compared to only a 15% increase industry wide). Ford stock shares have shown a gain of 19% this year.

One strategy that automakers have implemented in order to compensate for profit loss was to cut labor costs by negotiations with the UAW. United Auto Worker members at Ford Motor Co. authorized changes in the union contract that were implemented with the intent of saving the company as much as $500 million every year. Workers agreed to give up their annual bonuses and cost of living raises, in addition to reduced benefits. General Motors and Chrysler implemented a salary reduction and freeze for new employees and a no-strike agreement with its autoworkers through 2015.




Comments

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imwithcoco | 12:59PM (Tue, Aug 24, 2010)

Go Ford! Who needs or wants anything from GM?



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