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Ford Motor Co. on Wednesday jolted investors after the market closed by reporting that its second-quarter loss was more than double previously reported. Though Ford shares were up almost six percent on news that it hired a former Goldman Sachs investment banker to explore sales of assets, including some of Ford's brands such as Jaguar, it later reported it lost $254 million in the quarter due to worse than expected pension related losses, not the $123 million it reported. The previously reported loss was already much worse than analysts expected.



Ford also said after the market closed that it now forecasts that its Premier Auto Group - made up of Jaguar, Land Rover, Volvo, and Aston Martin, will lose money this year. The division was previously projected to make a small profit, down from a larger profit predicted in January. Ford blamed the change on slipping sales.


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Ford also confirmed Wednesday that it hired former Goldman Sachs mergers and acquisitions specialist Kenneth Leet to help chairman and CEO Bill Ford and the automaker's board sort out possible alliances with other automakers and sales of certain assets to raise cash.



At the center of speculation about Leet's work is whether or not Ford will look to tie up with another major automaker such as Renault/Nissan, should the French-Japanese company's negotiations with GM not bear fruit, or perhaps Toyota or Honda. Leet's other focus will be exploring, valuing and counseling over the future of Mercury, Volvo, Jaguar, Land Rover, and Aston Martin in Ford's portfolio, as well as whether Ford should seek to sell a stake in Ford Motor Credit.



Generally, Wall Street applauded the move, and Ford shares climbed 5.7 percent to $6.96 on the prospect that Ford was showing signs of making bigger structural moves in the company than previously announced. Goldman Sachs analyst Robert Barry said, "We think the most significant near term implication of any such news would be

Symbolic - that Ford (the company as well as CEO Bill Ford and the Ford family) is willing to take a more aggressive stance towards fixing the business, that there are no 'sacred cows.' This is a positive. In our view, no harm and possibly some good could come from having an outside adviser review Ford's assets."



At the center of asset sales are whether Ford can or should sell all or part of its portfolio of British brands. While Land Rover and Aston Martin are currently profitable, Jaguar is still climbing out of a deep financial abyss created when Ford targeted the brand for 200,000 sales a year worldwide. Though the brands would be hard to value, says analysts, because of how intertwined distribution and product development has become with Ford, Volvo, and Mazda, selling the British brands off would at least better focus capital investment and management attention on the brands and businesses that have the most upside in Ford's hands-Ford, Lincoln and Volvo, plus its ongoing one-third stake in Mazda. "Closing, selling, or 'JVing' [joint-venturing] money-losing Jaguar would likely be difficult, but positive," says Robert Barry.



Despite recent comments by Bill Ford that the company is "committed to all its brands," the move to re-evaluate is being driven by worsening financial results and market-share losses with a darkening outlook for turnaround. Ford sent out an employee memo on Wednesday stating that the company was exploring new options. Mark Fields says the company will be profitable by 2008. But the company is now bracing for sustained $3-plus-per-gallon gas prices, possibly heading to $4, which will play havoc on its SUV and pickup truck business.



Ford first announced that it had lost $123 million in the second quarter, a period in which Ford Motor Credit's performance wasn't enough to offset worsening financials in the North American auto business. It was a far worse result than analysts projected, though Ford hasn't been giving guidance.


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Asset sales at Ford wouldn't necessarily bring a lot of new cash in. A 51 percent stake in Ford Motor Credit, says analysts, would only bring about $6 billion at most. GM figures to get $14 billion out of a 51-percent sales of GMAC. But Ford is an almost pure auto financing company, without the mortgage lending and insurance businesses that make GMAC attractive. Indeed, Ford could have trouble attracting a buyer.



Jaguar, Land Rover, and Aston Martin would probably attract interest from private equity or a Chinese automaker. Ford could sell it all or maintain a 49-percent stake and give up management of the brands. Such a deal would not return a lot of cash, but pare headcount, labor costs in the U.K., and attention required by top management. One of the big headaches of such a deal would be the expensive British labor force, and the political wrangling in the U.K. Ford would need to do to get out of its labor contracts and not create backlash against its Ford products. Ford is the biggest automaker in the U.K.





Ford insiders say the move to re-evaluate some of the company's basic structure has been pushed not only by Ford board members John Thornton and Robert Rubin, former Goldman Sachs execs who are close to the Ford family, but by the family itself, which controls the voting stock of the automaker. The moves at General Motors to explore a tie-up with Renault/Nissan, and the world's biggest automaker's moves recently to dissolve alliances with companies like Suzuki and Fuji Heavy Industries, have put a tailwind behind GM's stock and outlook by Wall Street.


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Meantime, Wall Street analysts have been grousing that Ford not only has a too-thin product portfolio plan going forward, but that it has become less communicative in the last year just at the time when it should be more so.



---thecarconnection.com