Should Ford Follow Tesla and Go Private?

Tesla Inc. (NASDAQ: TSLA) CEO Elon Musk said he may take his company private. Tesla has very modest sales and is not profitable. Ford Motor Co. (NYSE: F) is large, profitable and suffering from investor exhaustion, as many of its plans falter. And it is controlled by a single family. The Ford family might want to take Ford private and dispense with a number of headaches.

Musk’s plan is elaborate and would value the company at an extraordinary $70 billion. In the most recent quarter, Tesla’s revenue was $3.4 billion, but it lost $742 million. In Ford’s most recent quarter, it had $38.9 billion in revenue and net income of $1.1 billion. Its car business has long-term debt of $12.5 billion. A complicating factor is that Ford Motor Credit has long-term debt of $89.5 billion. However, most of that is secured, and the division had earnings before tax of $645 million.

The Ford family has control of the company’s voting shares, so the decision to go private rests with them. They have watched the stock take a beating over the past two years, down 18% while the S&P 500 is higher by 31%. Ford’s market cap has dropped to $41 billion.

The Ford family can assume that the company’s financials will not turn around soon. It has struggled in the United States and discontinued several of its car models. Financial results in China, the world’s largest car market, are dreadful. Ford’s plans to tackle the future of electronic and autonomous vehicles have engendered a great deal of skepticism. CEO James Patrick “Jim” Hackett is less than widely regarded on Wall Street, in part because he has been so vague about Ford’s future. Ford could stop its revolving door of CEOs and put Executive Chair William Clay Ford Jr. into the top spot, which is effectively the job he already has.

Can Ford go private? It would need an army of investment bankers and lawyers to advise it and then to raise tens of billions of dollars. Musk’s idea has to give the Ford family the opportunity to review whether being public is to its advantage.

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