SOURCE: Auto InsiderFord family unity tested
Heirs reject hiring Wall Street adviser at tense meeting over what to do about ailing automaker's future.
Bill Vlasic and Bryce G. Hoffman / The Detroit News
The Ford family's 70.9 million Class B shares in Ford Motor Co. -- valued at $578 million at Monday's closing price of $8.16 -- account for only 3.7 percent of the automaker's outstanding stock, but represent a 40 percent voting stake under company bylaws. If the Ford family members were to sell off their Class B shares, they would lose controlling power of the company.
Major Class B shareholders Trust shares
# The majority of Class B shares, 51.7 million, are held in trust with Bill Ford Sr., Bill Ford Jr. and Edsel Ford II among the trustees. The family votes these shares as a block.
Bill Ford Sr.
# Son of Edsel
and Eleanor Ford, grandson of Henry Ford
# Owns 11.1 million Class B shares, or 15.63 percent
# Value: $90.6 million
Bill Ford Jr.
# Executive chairman of Ford Motor Co.
# Son of Bill Ford Sr., great-grandson of Henry Ford
# Owns 3.4 million Class B shares, or 4.79 percent
# Value: $27.7 million
Edsel Ford II
# Son of Henry Ford II, great-grandson of Henry Ford
# Owns 4.18 million Class B shares, or 5.89 percent
# Value: $34.1 million
# Daughter of Benson Ford; great-grandaughter of Henry Ford
# Owns 9 million Class B shares, or 12.71 percent
# Value: $73.5 million
Source: Ford Motor Co. , Detroit News research
DEARBORN -- With the Ford Motor Co. mired in a dangerous decline, Ford family members gathered April 21 for a critical meeting on the company's future and their role as controlling shareholders of one of America's last great industrial dynasties.
But this gathering, held at Greenfield Village not far from Ford's world headquarters, was quite different from previous family summits because of the presence of two of Wall Street's hottest dealmakers, Joseph Perella and Peter Weinberg.
The Detroit News has learned that Ford family members invited Perella and Weinberg and considered hiring them to advise the family about its huge stock holdings in Ford Motor -- a clear sign of growing concern about the automaker's long-term prospects.
At the end of the meeting, the family voted not to hire Perella Weinberg Partners as independent outside advisers.
But with their stock sinking in value and the automaker on the skids as shareholders convene Thursday in Wilmington, Del., for their annual meeting, the Ford family's resolve to retain its 103-year ownership position is being tested as never before.
People close to the situation told The News that the tense meeting highlighted differences within the family, particularly between Ford Motor Executive Chairman Bill Ford Jr. and his older sister, Sheila Hamp, and her husband, Steven Hamp, who became Bill Ford Jr.'s chief-of-staff in 2005 and left the company last year.
The Hamps, along with family adviser Bruce Blythe, were said to support the hiring of Perella Weinberg, whose principles have a track record of arranging blockbuster corporate mergers and acquisitions.
Some opposed advisers
Bill Ford opposed bringing outsiders into the family's secretive strategic discussions, as did his cousin, Ford Motor director Edsel B. Ford II. He was out of the country, but outlined his views in a two-page letter to family members, according to people familiar with the events.
Bill Ford's father, family patriarch William Clay Ford Sr., also rejected the idea of hiring outside investment bankers. Another prominent family member, Ford Motor executive Elena Ford, was said to have offered to buy the stock of any relative interested in selling out.
A Ford Motor spokesman said Monday that the company would have no comment on the family meeting. Bill Ford was also unavailable for comment.
However, in response to inquiries from The News about the family meeting, the automaker arranged an interview in which Steven Hamp offered his version of events.
Hamp, the former president of the Henry Ford complex, left his position last year as Bill Ford's chief of staff after the hiring of CEO Alan Mulally. Hamp said the April 21 meeting was a "dialog" about the company, but not a showdown on whether to sell it.
"Nobody said they were interested in selling -- that just simply did not come up," he said.
But he said that some Ford family members wanted an open forum on the company's performance and the value of the family's 40-percent voting stake.
"These are lay people," said Hamp. "They don't run auto industries. They simply are interested in a dialog about details of the family's ownership position."
The meeting also featured a lengthy presentation by Mulally, wooed to Ford's top executive job from Boeing Co. last September. He outlined the progress of the company's turnaround efforts after last year's devastating $12.7-billion loss.
People familiar with the meeting said family members questioned Mulally about Ford's decision to borrow $23.5 billion to finance a turnaround, given that $18.5 billion of that is backed by the company's U.S. assets -- including the Blue Oval itself. Family members also asked Mulally when the stock dividend payments might be restored.
Hamp said the family was unanimous in its support of Mulally: "The notion that there's a revolution going on, or that there is in any way a lack of confidence in what Alan is doing, is categorically wrong."
He also described himself as "one of the architects" of the push to bring Mulally to Ford, as well as other pieces of the analysis underpinning the automaker's turnaround. "So, I consider myself quite invested in what is going on," he said.
Hamp was more circumspect about the proposed hiring of Perella Weinberg, a top-echelon Wall Street firm that the New York Times recently said seeks to be "the sage counsel in the middle of huge decisions."
He called Perella and Weinberg "very bright guys," but said the family was not ready to hire them. He wouldn't directly answer whether he and his wife had pushed for the family to hire Perella Weinberg in the weeks leading to the meeting. "Ultimately, the concept of bringing in an outside advisor everybody agreed it was not time."
At one point in the meeting, Bill Ford left the room to allow family members to hold further discussions in his absence.
Telephone calls to Perella Weinberg's New York office were not returned Monday.
Advisers are well known
A veteran of landmark deals including the leveraged buyout of RJR Nabisco, Joseph Perella has been a star in investment banking circles for nearly 30 years. His partner, Peter Weinberg, is the grandson of Goldman Sachs legend Sydney Weinberg, who was a confidante of founder Henry Ford and the architect of the Ford Motor's initial public stock offering in 1956.
Hamp declined to say whether the family would revisit its decision to not seek outside counsel. "I don't know what the family would choose to do in the future or not," he said.
While the family has always presented a united front, auto industry insiders say the dramatic decline in the value of their Ford Motor holdings is bound to cause unrest.
"The family has been amazingly cohesive. There has never been any public dissension. (But) they're being tested now in a way that they have not been before," said David Lewis, a University of Michigan business professor and author of six books on Ford Motor and its founding family.
The Ford family today is a sprawling clan anchored by the 13 great-grandchildren of Henry Ford. Many family members don't live in Michigan and have never worked at the auto company.
They are intricately tied, however, by the 70 million shares of so-called "Class B" Ford Motor stock that they collectively own -- shares that have a combined voting power of 40 percent of all outstanding Ford Motor stock.
Those shares have always been voted in unison, and the family is famous in corporate circles for standing together through any crisis. But with Ford Motor struggling amid falling sales and record losses, the vast wealth of the family is under unprecedented attack.
Stake has fallen to $578M
When Bill Ford took over as chairman in 1999, the family's Class B shares had a market value of about $2.25 billion. Ford Motor's plunging stock price has reduced the stake to about $578 million.
And where the Class B shares generated $130 million in annual dividend payments to family members back in 1999, there are no dividends today. Many Ford family members also have significant holdings of common stock.
The troubled outlook at Ford Motor includes the specter of bankruptcy if the Mulally-led turnaround fails. In that event, the family's holdings could be wiped out entirely.
Industry watchers have long wondered what corporate catastrophe, if any, could break the Ford family's iron grip on the auto company.
"I used to think that the Fords were going to be able to maintain their financial interest in perpetuity," said historian Douglas Brinkley, author of the Ford saga "Wheels for the World." "But it's pretty bleak at Ford Motor right now, and I think all bets are off."
Family's power may change
Among holders of Ford's common stock, the family's "super-voting" shares have long been a point of contention.
At Ford Motor's annual meeting on Thursday, shareholders will be asked to vote on a recapitalization plan that would make all shares equal and give all shareholders one vote for each share that they own. Similar resolutions have been introduced in the past, but the family has the power to effectively veto such moves.
But the California Public Employees' Retirement System, a major institutional investor that owns 9.7 million Ford shares valued at $79.6 million as of May 3, told The News it will support the initiative as matter of principle.
"It's undemocratic," said spokesman Brad Pacheco. "Any kind of change like this can only have a positive impact on shareholder value."
People close to the situation told The News that Steve and Sheila Hamp have been voicing their concern about Ford Motor for some time. But Hamp said all the family members are understandably concerned.
"In a moment of great tension and great volatility in the industry, the members of the family are interested in knowing as much as they can about what is going on in the industry, what the prospects likely will be, what is going to happen," he said.
"A great deal of interest, a great deal of history, a great deal of culture and a great deal of passion goes in across the board to the members -- now in the fifth generation -- of that family."
He said that one reason the family voted against hiring Perella Weinberg was that it could be interpreted as a lack of confidence in Ford Motor Co.
"Largely," he said, "the agreement not to proceed with (hiring) anyone is because it would potentially be misunderstood" by outsiders as a move to sell the company.