REV: MARCH 28, 2002
ANDRÉ F. PEROLD
cross aim Companys Value enhancement Plan (A)
On April 14, 2000, pass over Motor Co. announced a distributeholder Value Enhancement Plan (VEP) to
significantly recapitalize the unanimouss ownership structure. Ford had accumulated $23 gazillion in notes
reserves, close to the companys largest ever cash in position and significant relative to Fords $57
jillion equity market capitalization. Under the VEP, Ford would return as much as $10 billion of this
cash to shareholders. In exchange for each share currently held, the syllabus would touch stockholders
one new-made share plus the choice of receiving $20 either in cash or additional new Ford common shares.
Ford also announced that it would broadcast ownership of its Visteon Corp. parts unit to
shareholders.
Fords share price had performed poorly over the previous year (Exhibit 1), and the proposal
pull a positive reaction from analysts who had been urging the company for months to distribute
cash to stockholders. Some hailed the VEP as the boldest step yet by Ford Chairman William Clay
Ford Jr. and Chief Executive officer Jacques Nasser to convince investors that they were
undervaluing the worlds No. 2 automaker.
However, the plan raised a number of questions for investors.
Why was Ford proposing this
act instead of a traditional share repurchase or a cash dividend? How did the interests of the
Ford family factor into this decision, and what did the transaction need about the future
involvement of the family in the company? Why was Ford distributing such a significant amount of
cash at this particular point in time? Did the distribution symbol a change in the companys appetite
for making acquisitions or future capital expenditures? If shareholders collectively elected to receive
little than $10 billion in cash, how would Ford distribute the remain cash?
Ford Motor Company
Headquartered in Dearborn, Michigan, Ford Motor Company was the worlds largest...If you want to get a full essay, order it on our website: Ordercustompaper.com
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