Business - Ford Motor may reduce Mazda stake as Kerkorian Exits

Bill Koenig & Naoko Fujimura

Oct. 22 (Bloomberg) -- Ford Motor Co., reeling from plunging U.S. car sales, may cut its stake in Japanese affiliate Mazda Motor Corp. to raise cash as billionaire Kirk Kerkorian unwinds his stake in the U.S. carmaker.

Mazda may buy some of Ford's shares in the Hiroshima-based carmaker, two people familiar with the discussions said last week. The remainder will be bought by other companies, including Hiroshima Bank Ltd., Tokio Marine Holdings Inc. and parts-makers, Kyodo newswire reported today, without saying where it got the information. Mazda spokesman Craig von Essen declined to comment on the report.

Selling part of its 33.4 percent stake in Mazda will help Dearborn, Michigan-based Ford raise cash as the credit crunch makes borrowing more difficult. Mazda's shares fell 7.4 percent in Tokyo today, contributing to a 53 percent year-to-date decline. Ford's Mazda stake is worth 124 billion yen ($1.24 billion) at current prices.

``Ford may not be able to raise much cash,'' said Koji Endo, an auto analyst at Credit Suisse Securities (Japan) Ltd., who has an `outperform' rating on Mazda shares. ``This is not bad for Mazda because new shareholders will be more financially stable than Ford.''

Ford has been an investor 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 Mazda cars. Ford earlier this year sold its luxury Land Rover and Jaguar units to Tata Motors Ltd. for $2.3 billion.

Mazda fell to 263 yen at the 11 a.m. trading break on the Tokyo Stock Exchange as the yen strengthened to a four-year high against the euro, threatening to erode earnings.

Kerkorian's Stake

Kerkorian, 91, sold his shares in Ford less than six months after expressing confidence in Chief Executive Officer Alan Mulally's turnaround efforts.

Last week, Ford's collapsing stock price forced Kerkorian to pledge another 50 million shares of his MGM Mirage casino company to back the $600 million credit line used to buy into the second-largest U.S. automaker.

Kerkorian's Tracinda Corp. sold 7.3 million Ford shares on Oct. 20 for an average of $2.43 each and said it contacted an investment bank about unloading the rest. The remaining 133.5 million shares were valued at $289.7 million yesterday.

``It was an investment that made no sense,'' said Maryann Keller, an independent auto analyst and consultant in Greenwich, Connecticut. ``He's pulling in his horns and concentrating on areas he knows best.''

Gambling, Hotels

Tracinda ``intends to further reduce its holdings'' in Ford to focus on gambling, hotels and energy, according to a U.S. regulatory filing that didn't give details.

Kerkorian disclosed in late April he had acquired 100 million Ford shares, and said June 19 he had boosted his stake to 140.8 million shares, or 6.43 percent. Tracinda endorsed Mulally's efforts to revamp Ford with job cuts, plant closings and new car models after $23.9 billion in losses since 2005.

Yet even as Kerkorian unveiled his holding, conditions were worsening for Ford. On May 22, less than a month after the investor's initial filing, Ford abandoned a goal for a 2009 profit. It hasn't set a new target. Cash consumption also is increasing, Ford has said, without giving a figure. Ford reported a record loss of $8.7 billion in the second quarter.

U.S. industrywide auto sales fell 27 percent last month, the biggest decline since 1991, as the credit crunch made it harder for buyers to find loans. Ford's sales were worse, plummeting 35 percent.

The freeze on borrowing added to the battering from gasoline prices that surged to a record high in July and crimped demand for big pickup trucks and sport-utility vehicles sold mostly by Ford, General Motors Corp. and Chrysler LLC.