Change in motion at Ford

Kai Ryssdal Aug 25, 2006

KAI RYSSDAL: It’s not just the conflict of interest, even the appearance of a conflict can get people in trouble. So Robert Rubin has resigned from Ford’s board of directors. Rubin was secretary of the Treasury for President Clinton. Now he’s chairman of the executive committee at Citigroup.

In his letter to Ford CEO Bill Ford that was released this morning, Rubin said Citigroup’s relationship with the car maker could Rubin’s presence on the board look bad. Of course, Rubin’s been on Ford’s board for six years, so there’s all kinds of speculation this might mean something’s up. Ford’s made no secret of it’s financial troubles.

Micheline Maynard covers Detroit for the New York Times. Hi, Mickey . . .

MICHELINE MAYNARD: Hi. It’s nice to be with you.

RYSSDAL: Can we assume from this announcement about Robert Rubin this morning leaving the board that there is some kind of deal now imminent?

MAYNARD: Well, there’s certainly suspicions that by taking himself off the Ford board that his company, Citigroup, will be involved in some kind of a transaction. As far as imminent, I mean I don’t think in the next week or so but I think that is something that’s on the front burner at Ford.

RYSSDAL: There’s been a lot of motion out of Ford the past couple of weeks. The production cuts that were announced last week; they’re promising now a new turnaround plan by September. Does this mean, do you think, that this time they’re really serious?

MAYNARD: I think this time they have to be serious because they’ve created such great expectations out there. The “Way Forward” plan that was announced back in January was really only a start on all of this. And since then the market has gotten a lot worse. Ford has seen sales of its big pickup trucks and its big SUVs pretty much fall out from under it. And there’s no sign that gas prices are going to go down significantly, so they really have to demonstrate at this point that they’ve got a plan and they can execute it.

RYSSDAL: I can’t help but notice though that it’s all about cutting costs and restructuring the organization, not about how to actually sell more cars.

MAYNARD: Well, that’s right. And that’s one of the biggest issues here. John Casesa, the auto analyst, said that there are kind of three parts to something like this. There’s the resizing, the restructuring and the reinventing of the comapny. And all we’re really going to see here is the resizing. You know, Ford is working on the restructuring. But everybody still has a lot of questions about what the company will look like going forward.

RYSSDAL: Let me ask you a quick question about that. The names that are being tossed about in the papers this morning were Jaguar and Land Rover as possibly being unloaded. What else might Ford sell and what might they hang onto?

MAYNARD: Well, those are the two names that come up the most frequently. I think they will hang onto Volvo and Mazda because the platforms that those companies . . . the underpinnings of their vehicles . . . are being used on Ford vehicles. In fact, the Ford Fusion and the new crossover vehicle called the Edge, are actually based on a Mazda platform.

You know, there are bits and pieces of the company that they could probably put up for sale. I think the biggest question is about Ford Credit, and whether Ford will sell a piece of Ford Credit. They have said that there is no need to do so and they don’t want to do so. But General Motors sold a 51 percent interest in General Motors Acceptance Corporation, and so that naturally raises thoughts that Ford might do the same.

RYSSDAL: Helps us understand why Ford would do that.

MAYNARD: I don’t think they want to. I think the reason they would do that is to raise cash. But I don’t think liquidity, just raising a pile of cash, is as much of a concern for at Ford. Ford has plenty of cash. The question now is what does it want to do with the cash. Does it want to buy out dealers? Does it want to buy out workers? Does it want to spend real money on product development with the structure that it has? Or, does it want to basically use that money to sort of invest in its future?

RYSSDAL: Micheline Maynard is the Detroit bureau chief for The New York Times. Thanks, Mickey.

MAYNARD: My pleasure.

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