Ford may sell Mazda stake

Ford Motor Co., the second-largest US automaker, is considering selling its controlling stake in Japan's Mazda Motor Corp. to bolster cash as sales fall, a person familiar with the deliberations said.

A sale of the one-third holding in Mazda isn't certain, said the person, who asked not to be named because Dearborn, Michigan-based Ford hasn't made a decision. ``We do not want to comment on speculation,'' Ford said today in a statement.

Dumping Mazda would help Ford blunt a mounting cash drain as the US auto market sinks to the lowest levels since 1991. Ford's domestic sales slid 35% in September, outpacing a 27% industry drop, on sagging demand for the pickups and sport-utility vehicles that provided most of its 1990s profits.

``It does make sense to sell off Mazda,'' said Dennis Virag, president of Automotive Consulting Group in Ann Arbor, Michigan. ``Mazda has no role in Ford's strategic plan.''

The possible sale was reported earlier by Nikkei English News and state-run Japanese broadcaster NHK. Hiroshima, Japan-based Mazda said today it had nothing to announce, according to a statement.

Based on yesterday's closing share price in Tokyo, Ford's Mazda shares were valued at $US1.36 billion.

Ford, which has posted $US23.9 billion ($36.6 billion) in losses since its last annual profit in 2005, formed an automatic transmission joint venture with Mazda in 1969 and acquired a 25% stake in Japan's fourth-largest automaker in 1979. Ford expanded the holding to 33.4% in 1996, giving it effective control.

Dumping assets

A sale would extend Ford's moves to shed assets outside the US, including U.K. automakers Jaguar and Land Rover, as Chief Executive Officer Alan Mulally focuses on shoring up the automaker's money-losing North American operations. He faces a balancing act to ensure that Ford has enough cash to weather the sales slump while still developing new models.

Ford had automotive cash of $US26.6 billion as of June 30, after borrowing $US23.4 billion in late 2006 by pledging collateral such as its headquarters building, factories and trademarks.

After targeting 2009 for a return to profit, Ford withdrew that goal in May and hasn't set a new one. The company's second- quarter loss was a record $US8.7 billion.

As part of Mulally's push to diversify Ford's product lineup at lower costs, Ford is planning to merge its Mazda6- based Fusion platform and its European Mondeo sedan platform starting in 2010.

Switching lenders

Also last month, Mazda said it is switching to a unit of JPMorgan Chase & Co. as the main source of US financing for its vehicles from Ford's in-house lending arm. Chase Auto Finance Corp. will be the primary provider of loans and leases starting Oct. 16. Ford and Mazda said the move was a joint decision.

Ford and Mazda jointly own factories in the US and Asia, including a Flat Rock, Michigan, plant that produces the Mazda6 and Mustang.

Ford has used Mazda to help groom executives, including incoming Chief Financial Officer Lewis Booth and Executive Vice President Mark Fields, who heads Ford's North American operations. The US automaker has also based models on Mazda platforms or major structural parts. They include the Fusion midsize sedan, based off the Mazda6.

After Mazda shares tumbled 48% this year, Ford may want to hold off on a sale until stock prices improve, said Maryann Keller, an independent auto analyst and consultant in Greenwich, Connecticut.

``This isn't the time to sell,'' Keller said. ``Ford would not get the fair value for that business.''

Bloomberg News