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Ford OKs share buyback
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September 14, 2000: 1:06 p.m. ET
Analysts had expected delay in purchase as firm dealt with tire recall
By Staff Writer Chris Isidore
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NEW YORK (CNNfn) - Ford Motor Co. said Thursday it is buying back up to $5 billion of company stock, settling fears by some analysts and investors that its recent tire woes would delay the anticipated repurchase.
"Today's action goes beyond what we announced in April," said a statement Henry Wallace, Ford group vice president and chief financial officer. The automaker said at that time that it would return $10 billion to shareholders through an unusual "Value Enhancement Plan" that gave them the opportunity to liquidate part of their stock's value with cash, as well as a more traditional share repurchase. The value enhancement plan returned $5.7 billion to shareholders, Wallace said, so Thursday's announcement topped the previous buyback plans by $700 million.
Wallace also said in an interview with Reuters that consensus estimate for third-quarter earnings is "in the ballpark," confirming it would not top year earlier results for the period.
 The current forecast of analysts surveyed by earnings tracker First Call calls for the company to earn 52 cents a share in the period, down from 54 cents a share in the third quarter of 1999. Ford has improved year-over-year earnings comparisons for 17 straight quarters going into the current period.
"So if that were to turn out that way, then obviously we would miss the 18th consecutive quarter," Wallace told Reuters.
Ford lowered earnings guidance in late August due to costs and lost revenue associated with the Firestone tire recalls.
The setback comes even the share repurchase and value enhancement plan should be helping earnings per share. The value enhancement plan was announced at the same time the company confirmed plans to spin off its Visteon Corp. (VC: Research, Estimates) auto parts division to shareholders.
Despite that distribution, Ford shares have suffered since Bridgestone/Firestone Inc. announced Aug. 9 it was recalling 6.5 million tires used primarily on Ford vehicles. Ford has responded by shutting three plants that make its popular and profitable Explorer sport/utility vehicle and pick-up trucks, in order to redirect tires originally slated for new vehicles to replace recalled tires.
Analysts had been predicting the share repurchase would be delayed as the company dealt with problems associated with the tire recall.
"It's definitely positive news," said Nicholas LoBaccaro, analyst with Lehman Brothers. "The amount is more than most people thought it would be when it took place, and most people didn't think it would happen now in any case."
LoBaccaro said he wasn't too surprised that Ford went ahead with the buyback right now, despite the recall woes.
"I think if it were a new initiative out the blue, it could conceivably cause public relations problems. But this was basically announced in April before anyone knew about the tires," he said. "Also, Ford has accumulated a lot of cash. It's not as if it's a matter of giving it to shareholders or giving it to tire victims. The (replacement) tires are moving as quickly as conceivably possible. That's definitely the bottleneck, not Ford's financial condition."
Ford issued a statement Thursday saying its board had reviewed its handling of the recall crisis and gave a vote of confidence to Ford management's handling of the problems.
"The management team led by (Ford Chief Executive) Jac Nasser is doing an outstanding job in a difficult situation," said the statement from William Clay Ford, chairman of the board, who has reportedly clashed with Nasser at times in the past. "Their focus has been on doing everything possible to get bad tires replaced with good tires and the board fully supports their efforts."
But Ford's efforts took another hit Thursday, as new reports focused on another five deaths of passengers and drivers in Ford Explorers equipped with the recalled tires since the time of the Aug. 9 announcement. Federal safety regulators are expected to update Monday the number of deaths they attribute the defective tires.
Shares of Ford (F: Research, Estimates) gained 38 cents to $25.69 in trading after the announcement, although that was below levels immediately after the announcement. 
-- Click here to send e-mail to Chris Isidore
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Ford Motor Co.
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