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Personally I don't really understand this move. It may be non-core to Ford, but it isn't that far off what their primary business is either - and you're not going to tell me that giving loans and such is more of a core business. It's profitable, and their core business is not - keep hertz.

Ford moves to jettison Hertz rental car agency

Automaker files IPO statement with SEC as it looks to focus on making and selling vehicles.

By Eric Mayne / The Detroit News

About Hertz

What: Car rental, and industrial and construction equipment rental

Locations: 7,200 in more than 150 countries

Size of fleet:: More than 525,000 vehicles

Annual revenues: $5.5 billion*

Annual income: $365 million*

No. of employees: 29,300


Source: Ford, Hoover's

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Ford Motor Co. has taken an important first step toward jettisoning its wholly owned Hertz rental car agency.

The automaker announced late Monday that a registration statement for an initial public offering (IPO) covering its economic interest in Hertz had been filed with the Securities and Exchange Commission.

But it's not a done deal, Ford said.

The automaker might still sell Hertz -- the world's largest general use car rental company -- to a third party.

"It's a formality," Ford spokesman Glenn Ray said of the SEC filing. "(An IPO is) an option that can now be pursued."

The move follows Ford's announcement April 20 that it was evaluating long-term strategic objectives for Hertz.

It's also consistent with the revitalization plan Ford launched in 2002.

In addition to payroll downsizing and plant closures, Ford's plan called for the divestiture of businesses that are not integral to the manufacture and sale of cars and trucks.

At that time, Hertz's equipment rental division was targeted for divestiture, but Ford could not find a buyer.

Monday's filing gives Ford a chance to test the waters again.

"They want to establish a price or a value in the open market and go from there," said David Healy of Burnham Securities.

Healy estimated the rental car company's value to be as high as $5.5 billion, based on its 2004 net income of $365 million. An IPO, he added, would likely reduce Hertz's borrowing costs.

Last month, after lowering Ford's credit rating, Moody's also lowered Hertz's long-term rating to Baa3 from Baa2.

Ford would benefit, too. Hertz contributed about 20 cents per share to the automaker's earnings, Healy estimated.

"There's not much of a penalty to Ford's ongoing earnings, and at the same time, they would get -- if they sell the whole thing -- they would get $4 billion to $5 billion to stuff into the health care fund or pension fund or bring out a new Mustang or whatever," he added.

Ford lowered its 2005 earnings expectations in April, citing external factors such as higher raw material costs, high gasoline prices, spiraling health expenses and unfavorable currency rates.

Ford expected to break even in the second quarter or lose money. In addition, Ford abandoned a mid-decade annual pre-tax earnings goal of $7 billion -- another milestone of its revitalization plan.

Ford Chairman and CEO Bill Ford hinted in April that Hertz would be jettisoned. "It's noncore to us, long-term," he said.

The precursor to Hertz was established in 1918, with a dozen Model T Fords in its fleet. It became a wholly owned Ford subsidiary in 2001.

You can reach Eric Mayne at (313) 222-2443 or [email protected]
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