Smith Faculty Opinion Article

By Dr. Peter Morici, Professor of International Business E-MAIL WEB SITE

May 11, 2009

Ford Public Offering a Smart Move

The Ford Motor Company has announced it will offer 300 million new shares for sale. The proceeds are to be used to fund general corporate purposes and a portion of the company's obligation to the Voluntary Employee Benefits Association (VEBA) retiree health care trust.

At a time when the car market is depressed and will likely continue so for many months, Ford may need additional cash, and this is a smart way to find it. In addition, minimizing the stock it may have to offer the UAW as part of negotiations to further trim labor costs is a smart move too.

Ford is gaining retail market share, and separating itself from GM and Chrysler in the minds of car buyers and investors. A successful share offering could reinforce the positive image gains and car buyer confidence now being generated by its strong line up of new vehicles.

From the Focus to the Flex, Ford is separating itself from the pack. In many categories, its cars now challenge offerings from Toyota and Honda for best in class. This is a good time to raise needed additional cash.

Peter Morici is a professor at the University of Maryland School of Business and former Chief Economist at the U.S. International Trade Commission.