Farewell Portends Changes At Ford
Rubin Resigns As Officials Mull Selling Brands

By Sholnn Freeman
Washington Post Staff Writer
Saturday, August 26, 2006

Citigroup Inc. senior executive Robert E. Rubin resigned from Ford Motor Co.'s board of directors yesterday, citing potential conflicts of interest as the automaker reviews its long-term strategy, which could include selling off European luxury brands.

Like General Motors Corp., Ford is struggling to revamp its operations as the 1990s boom in sales of sport-utility vehicles comes to a close. Ford Chairman William Clay Ford Jr. has said he is open to forming alliances with other automakers. In his bid to turn around the company, Ford has said everything is on the table.

In early August, Ford hired investment banker Kenneth Leet, an 18-year veteran of Goldman Sachs, to spearhead a review of long-term strategy for the automaker, including alliances with other automakers or asset sales. Leet reports to Bill Ford. GM is in talks with Nissan Motor Co. and Renault SA about a possible alliance.

Rubin, a treasury secretary in the Clinton administration, said in a letter to Bill Ford that Citigroup's "multi-faceted relationship" with Ford could create the appearance of a conflict, although he said no conflict exists currently. Rubin is on Citigroup's board of directors and is a strategic adviser to the bank's senior executive team. Citigroup has acted as consultant to Ford on investment banking issues for the past several years. Rubin had been a Ford director since 2000.

Ford is in talks to sell Jaguar and Land Rover to an investment group led by Jacques Nasser, a former Ford chief executive, according to a source familiar with the discussions who spoke on condition of anonymity because talks are ongoing. Nasser is a senior partner of One Equity Partners LLC, the private equity arm of J.P. Morgan Chase & Co. A spokeswoman for J.P. Morgan declined to comment.

Ford spokesman Oscar Suris also refused to comment. "Our process is ongoing as we speak," he said. "Come September you can rest assured we will have more to say."

Ford's share price climbed 3.1 percent yesterday to $8.

Ford lost $1.4 billion in the first half of the year. Last week, the automaker said it would temporarily halt production at 10 assembly plants at times through the end of the year. At dealerships, Ford is offering zero-percent financing discounts to help revive sales and clear stocks of unsold vehicles. Like GM, Ford is facing reduced demand for large pickup trucks, a big source of profit along with SUVs.

"Bill Ford has one problem. It's a four-letter word: time," said Jim Sanfilippo, senior industry analyst at AMCI, a consulting firm in Bloomfield Hills, Mich. "Ford Motor Company needs to reenergize itself. They are wretchedly downsizing the company as fast as they can."

In July, Toyota Motor Corp. surpassed Ford in monthly U.S. new vehicle sales for the first time. Ford's American brands Lincoln and Mercury have struggled in recent years and could be under review, analysts have said. Ford's share of the U.S. market has slid this year to 17 percent, down from 21 percent five years ago, according to J.D. Power and Associates. Each percentage point of market share is equivalent to about 170,000 lost vehicle sales a year.

Bill Ford and other top executives have blamed Ford's current financial problems on the downturn in sales of large SUVs. In the 1990s, Ford was flush with cash from the sales of the vehicles such as the Explorer, Expedition and Lincoln Navigator. The Expedition and Navigator once boasted profits of $10,000 or more per vehicle. But those sales have slowed significantly because of rising gas prices, changing consumer attitudes toward dependence on Middle Eastern oil and concerns about global warming. Consumers have increasingly moved to car-based SUVs or exited the SUV market altogether in favor of passenger cars. Detroit executives have said they were caught off guard by the shift.

Mark Fields, a Ford executive vice president and president of the Americas division who was tapped last year by Bill Ford to lead the automaker's turnaround, has pledged to return Ford's North American operations to profitability by 2008. As part of the initial plan, Ford is cutting 30,000 jobs by halting operations at 14 factories by 2012, including seven big auto assembly plants.

Analysts say Ford is also suffering from GM's improved position. To cope with weak SUV and pickup demand, GM speeded up redesigns of large SUVs and pickup trucks. Those trucks have performed well, making Ford's SUV line look dated.

GM's new line of pickup trucks, due later this year, could pose a threat to Ford. Toyota is also ramping up production of a new pickup truck this year at a new plant in San Antonio.

The Ford F-Series pickup truck has long been the top seller in the market. Ford officials are counting on the brand loyalty of pickup truck buyers, and the attractiveness of their models.

Ford and other executives have acknowledged that an over-reliance on trucks led to the current financial crisis. In a Washington speech in June, Fields said Ford paid too little attention to consumer trends. He said the automaker failed to look over the horizon to the day when consumers might opt for something else.

Fields reiterated that Ford isn't seeking a federal bailout. However, as Detroit's problems have mounted, the automakers have increasingly complained that Washington officials are turning their backs. Fields said the U.S. government should address the heavy burden of employee medical and pension costs and the costs associated with modernizing factories. U.S. automakers also have complained of unfair trade barriers in Asian countries and accused those countries of currency manipulation.