Ford Motor Co, reeling from plunging US car sales and a sinking share price, said it would raise about US$540 million selling part of its stake in Japanese affiliate Mazda Motor Corp to ease cash concerns.
The automaker will sell 20 percent of Mazda, reducing its holdings to 13 percent, it said in a statement yesterday. Hiroshima-based Mazda will buy back up to a 6.9 percent stake for as much as ¥17.9 billion (US$186 million), it said separately.
Ford, which rescued Mazda from bankruptcy 12 years ago, will raise cash from the sale as the credit crunch makes borrowing more difficult. The Dearborn, Michigan-based automaker, General Motors Corp and Chrysler LLC, are seeking a combined US$25 billion in US government loans.
“When the airplane is too heavy and you’re losing power, you have to throw out what you can,” said Edwin Merner, president of Atlantis Investment Research Corp in Tokyo, whose parent company manages about US$3.1 billion. “It’s a desperate, desperate situation.”
Ford’s US sales plunged 28 percent last month as the industry heads to the lowest annual tally in 15 years. Ford chief executive officer Alan Mulally, GM’s Richard Wagoner and Chrysler’s Robert Nardelli were scheduled to testify yesterday at a Senate Banking Committee hearing.
Ford’s sale of Mazda shares follows General Motors Corp’s sale of its 3 percent stake in Suzuki Motor Corp yesterday for ¥22.4 billion.
Ford has owned a stake in Japan’s fifth-largest automaker since 1979. The companies jointly own factories and Ford has based midsized models such as the Fusion sedan on the Mazda6.
Ford’s shares have tumbled 74 percent this year. They slid US$0.08, or 4.4 percent, to US$1.72 on Monday in New York Stock Exchange composite trading.
Mazda, which has slumped 67 percent this year, rose 6.4 percent to close at ¥184 yesterday on the Tokyo Stock Exchange.
In May, Ford retreated from a profit goal next year and hasn’t set a new target. It has also withdrawn estimates of how much cash it will use from US$23.4 billion it borrowed in 2006 to pay for cutting jobs, plant closings and new-model development.
The carmaker sold its Jaguar and Land Rover luxury units to India’s Tata Motors Ltd for about US$2.4 billion in June.
Ford formed an automatic-transmission joint venture with Mazda in 1969 and acquired a 25 percent stake in the Japanese automaker in 1979.
Ford took effective control of Mazda in May 1996, raising its stake to 33.4 percent.
Suffering from debt and excess capacity, the Japanese automaker lost ¥102 billion in the three years through March 1996.
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