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  • Writer's pictureJeff Matthews

Ford Fight

Former U.S. Treasury Secretary Robert E. Rubin has resigned from the board of Ford Motor Co., citing a potential conflict of interest with his duties as a member of the chairman’s office at the banking company Citigroup Inc. —Wall Street Journal Thus one of the world’s most successful bankers, whose career arc has taken him from the head of Goldman Sachs to the head of the entire United States Treasury Department to the head of Citigroup, has stepped down from his board seat at Ford.

“Citigroup’s multi-faceted relationship with Ford could raise a question whether my relationship with Ford and Citigroup creates an appearance of conflict. Although no conflict currently exists and while I would have liked to remain involved, I have with great regret concluded that I should resign from the Board at this time,” Mr. Rubin said in the letter. This comes on the same day the news wires are reporting interest in Ford’s luxury car group, specifically Jaguar—obnoxiously pronounced “Jag-You-Wahr” in TV ads, as if giving it an upscale accent suddenly makes the losing-money-hand-over-fist brand more valuable—by at least two groups, one of which includes Jacques Nasser, the man who, as CEO of Ford, wasted Ford’s cash hoard on not one, but several really terrible acquisitions, including Jag-You-Wahr.

I have no idea how things will shake out at Ford—whether it will turn itself around or whether it will hit the proverbial wall—but if I were a private equity guy, I’d be cranking numbers on the conglomerate like there’s no tomorrow.

For all its problems, Ford has $40 billion in cash on the books, so it’s not like they’re going to file Chapter 11 tomorrow. Further, the current equity value is a modest $14.9 billion, which any private equity guy could match with a few phone calls—one being to Bob Rubin at Citibank, I would think.

Now, what would a private equity buyer get for their $15+ billion?

Well, for starters, they’d get Ford’s 30% stake in publicly-traded Mazda—408 million shares worth $6 each, or $2.4 billion by my calculator.

Second, they’d get the “Premier Auto Group,” which sells over $30 billion of the kind of brand names you’d think anybody would want to own at the right price—Land Rover, Volvo, Aston-Martin and Jag-You-Wahr—yet manages to lose money doing so.

And that’s just scratching the surface. Who knows what other hidden assets—along with the many well-enumerated hidden liabilities—exist within Ford?

After watching Clayton Dubilier (insert euphemism for “steal” here) one of those hidden assets, Hertz, from Bill Ford last December with a mere $2.3 billion equity investment, how many other private equity firms are now lining up behind the scenes to see what else they can (insert euphemism for “steal” here) from the desperate scion of a once-proud family that owns all of 5% of the common shares yet acts as if Ford is their own private employer-of-last-resort?

My guess is, with Bob Rubin resigning from Citigroup’s board in order to avoid “potential conflicts,” there’s a whole bunch of ‘em.

Jeff Matthews I Am Not Making This Up

© 2006 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.

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