Ford, After Almost 3 Decades as Investor, May Sell Mazda Stake

By Bill Koenig

Oct. 12 (Bloomberg) -- Ford Motor Co., after almost three decades as an investor in Japan's Mazda Motor Corp., is considering selling its controlling stake, a person familiar with the deliberations said.

A sale of the one-third holding in Mazda isn't certain, said the person, who asked not to be identified because no decision has been made. ``We do not want to comment on speculation,'' Dearborn, Michigan-based Ford said yesterday in a statement.

Unloading the stake would end an era in which the second- largest U.S. automaker used Mazda to help groom executives including its incoming finance chief and its current head of North American operations. Ford faces a mounting cash drain as the U.S. auto market sinks to the lowest levels since 1991.

``Everything needs to be looked at in the current situation,'' said Dennis Virag, president of Automotive Consulting Group in Ann Arbor, Michigan.

Based on the Oct. 10 closing share price in Tokyo, Ford's Mazda holding was valued at $1.36 billion. Ford has lost $23.9 billion since the end of 2005. Last month's 35 percent slide in U.S. sales outpaced the 27 percent industry drop as the credit crisis damped auto demand, especially for the pickups and sport- utility vehicles that provided most of Ford's 1990s profits.

The possible sale was reported yesterday by Nikkei English News and state-run Japanese broadcaster NHK. Hiroshima, Japan- based Mazda said it had nothing to announce, according to a statement.

`No Role'

``It does make sense to sell off Mazda,'' Virag said. ``Mazda has no role in Ford's strategic plan.''

Under Chief Executive Officer Alan Mulally, Ford is emphasizing unifying its own regional units as it tries to end losses.

The automaker's European division with its small-car models ``basically replaces the role Mazda played,'' said David Cole, chairman of the Center for Automotive Research in Ann Arbor.

Ford formed an automatic-transmission joint venture with Mazda in 1969 and acquired a 25 percent stake in Japan's fourth- largest automaker in 1979. Ford expanded the holding to 33.4 percent in 1996, giving it effective control.

A sale would extend Ford's moves to shed assets outside the U.S., including U.K.-based automakers Jaguar and Land Rover, as Mulally focuses on shoring up the automaker's money-losing North American operations. He faces a balancing act to ensure that Ford has enough cash to weather the sales slump while still developing new models.

Ford's Cash

Ford had automotive cash of $26.6 billion as of June 30, after borrowing $23.4 billion in late 2006 by pledging collateral such as its headquarters building, factories and trademarks.

After targeting 2009 for a return to profit, Ford withdrew that goal in May and hasn't set a new one. The company's second- quarter loss was a record $8.7 billion. Ford fell 9 cents to $1.99, a 26-year low, in New York Stock Exchange composite trading on Oct. 10.

As part of Mulally's push to diversify Ford's product lineup at lower costs, Ford is planning to merge its Mazda6- based Fusion platform and its European Mondeo sedan platform starting in 2010.

Also last month, Mazda said it is switching to a unit of JPMorgan Chase & Co. as the main source of U.S. financing for its vehicles from Ford's in-house lending arm. Chase Auto Finance Corp. will be the primary provider of loans and leases starting Oct. 16. Ford and Mazda said the move was a joint decision.

Factories, Executives

Ford and Mazda jointly own factories in the U.S. and Asia, including a Flat Rock, Michigan, plant that produces the Mazda6 and Mustang.

Ford has used postings at Mazda to help broaden managers' experience, including Lewis Booth, whose promotion to chief financial officer was announced Oct. 10, and Executive Vice President Mark Fields, who leads Ford's North American operations.

Mazda platforms and major structural parts also have been adopted as the basis for Ford models including the Fusion midsize sedan, based off the Mazda6.

After Mazda shares tumbled 48 percent this year, Ford may want to hold off on a sale until stock prices improve, said Maryann Keller, an independent auto analyst and consultant in Greenwich, Connecticut.

``This isn't the time to sell,'' Keller said. ``Ford would not get the fair value for that business.''

To contact the reporter on this story: Bill Koenig in Southfield, Michigan, at wkoenig@bloomberg.net