Smith Faculty Opinion Article
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