Ford Motor Company
(NYSE:F) shares moved up marginally today after the company announced
that it would explore the possible sale of two of its luxury brands
today. The company reportedly hired Goldman Sachs, HSBC Holdings and
Morgan Stanley to explore strategic options for its LandRover and
Jaguar segments. Many investors are hoping that the continued
divestures will shake up the company's stagnant stock.
The
number two auto retailer in the United States has been struggling for
some time with its restructuring process aimed at turning around its
North America operations. Ford has openly stated that they do not
expect to be profitable until at least 2009 with the restructuring
process costing the company more than $10 billion. These efforts
include recently announced plans to close 16 manufacturing facilities
and buyout over38,000 employees.
So, why should investors be
looking at Ford? Well, the truth is that most of the bad news is
already priced into the stock. The company has openly told investors
that it doesn't expect to be profitable for some time and the future
beyond that is very uncertain. More importantly, investors are only
expecting more bad news from the automaker after its long history of
disappointments - this further compounds the discount at which the
stock is trading.
The new variable added to the equation is the
proposed sale of the company's Jaguar and LandRover segments. We know
that Ford already divested its Aston Martin division early this year in
a sale to private equity that shocked many analysts - nobody expected
the segment to attract so much interest. Therefore, it is not
unreasonable to assume that the company's sale of Jaguar and LandRover
may attract similar interest.
Some investors are also looking at
Ford as a whole. The move to divest many of its assets provides the
company with a significant amount of cash while making it substantially
cheaper. This trend has fueled speculation that private equity may get
involved if shares get too cheap - that is, if they don't rise upon the
sale of these assets. This is all potentially good news for
shareholders who stand to benefit significantly from these moves!
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