The Ford family's $581 million loss
Family stake in the U.S. auto giant has lost half its value since 2001. Some members of the Ford family are starting to worry about their share, says Fortune's Alex Taylor.
(Fortune Magazine) -- What would you do if $581 million of your family's fortune had been vaporized in just 5 1/2 years? That's a question that Bill Ford and the other 46 fourth- and fifth-generation members of the Ford auto dynasty are grappling with these days.
The family's class B stock was valued at $1.14 billion when Bill took over as CEO of Ford Motor (Charts) in 2001. Today the shares are worth less than half that. To make matters worse, the clan's once-lucrative dividend stream has dried up: Payouts that amounted to more than $28 million annually as recently as 2005 have been slashed to zero this year.
Some of the heirs are concerned about their stake, and they've begun talking with investment banks about their financial options. One of those they've consulted is the boutique strategy firm Perella Weinberg, where co-head Peter Weinberg is the nephew and grandson of two former executives at Goldman Sachs (Charts), Ford Motor's longtime investment bank. So far, the family has yet to retain anyone.
The move to seek outside investment advice raises some questions, many stemming from the possibility that the descendants of Henry Ford might sell some of their stake to raise money or diversify.
Will the family, which has controlled the automaker for its entire 103-year history, continue to hold enough special class B stock to maintain its 40 percent control of the company's shareholder votes? And could the family's interests be diverging from those of the company's other shareholders?
After all, unloading a significant number of shares could batter an already wounded stock. And if so, will Bill Ford, who now serves as executive chairman of the board after resigning as CEO in September, have to choose between his corporate duties and his kin? (A Ford Motor spokesman says, "There is no divergence of interests between the common and class B shareholders. The Ford family, like the common shareholders, want a strong company.")
That may be, but Ford Motor is in perilous shape. It lost $12.6 billion last year and is burning cash at a furious rate: It expects $17 billion to be consumed in the next three years. In order to stay in business while it tries to develop a hit car or two, it has pledged most of its assets as collateral for $23.5 billion in loans.
Ford's own employees show little faith. After being offered buyouts, they are stampeding toward the exits with fewer than half expressing confidence in the company's future.
As with any clan, there are some Fords who are more concerned about the company's future than others. If anyone is crying poverty, though, the news has not surfaced publicly.
Today's Fords are spread around the country, settled in old-money redoubts such as New Canaan and Greenwich, Conn., Southampton on Long Island, and Hobe Sound in Florida. They still gather for twice-yearly meetings and maintain a family office in Dearborn to handle financial matters.
Two fourth-generation members, Bill and Edsel, represent the wings of the dynasty, which so far show no signs of clashing on the search for financial alternatives. The men are first cousins, and both sit on the company's 12-person board of directors. Edsel, himself a former executive at Ford Motor and Ford Credit (Charts), was once considered a contender for the job that Bill ended up getting. But despite Bill's rocky reign, there are no visible challengers to his position as clan leader.
When asked whether their relatives still stand behind Bill, his older cousin Anne Ford replies, "Oh, yes, yes, yes." Still, if Ford Motor's finances continue to weaken, the family might even consider selling its entire stake, leaving a different answer to the company's old slogan, "Is there a Ford in your future?"
From the April 16, 2007 issue