Ford's German unit sticks to forecast of 2002 profit

July 15, 2002

COLOGNE, GERMANY Bloomberg news reported that Ford-Werke AG stuck to its forecast of earning a profit this year as the German unit of the No. 2 carmaker introduces new car models, making up for a decline in Western European sales.

Ford Motor Co. also plans to buy out the other shareholders of Ford-Werke and de-list the unit from Frankfurt's stock exchange as a cost-cutting measure, the carmaker said at Ford-Werke's annual shareholders meeting.

Ford-Werke had a 2001 loss of 80.4 million euros ($79 million). The carmaker this year has won market share in Western Europe from General Motors Corp. and Volkswagen AG. Ford will add the Fusion to a model line-up that includes the Fiesta and Mondeo. Ford's European operations were profitable in the first quarter, in contrast to losses in North America.

"The economic upturn we expected in the second half will now probably come in 2003," said Ford-Werke Chief Executive Rolf Zimmermann. "That's due to the turbulence on the capital markets, the uncertainty of the outcome of the (German) elections and the entire economic environment."

Germany holds parliamentary elections in September. The country's unemployment in June climbed to the highest level in almost three years and factory production fell, adding to evidence that a recovery in Europe's largest market may stall, hurting consumer spending. Germany's economy grew 0.2 percent in the first quarter after shrinking in the previous six months.

Ford will pay about 7.1 million euros, or 640 euros a share, for the 11,100 shares in Ford-Werke it doesn't already own. The Dearborn, Michigan-based carmaker owns 99.85 percent of the German unit's shares. Ford-Werke shares today fell as much as 11 euros, or 1.7 percent, to 629 euros.

Under a law in effect since Jan. 1, owners of 95 percent or more of a publicly traded Germany company can force minority holders to sell their stakes. Ford-Werke will no longer have to bear the expense of renting a hall and providing food and reports for annual meetings.

"In this form, the company can be managed much more easily and inexpensively, because a great deal of formal costs will disappear," said Zimmermann. The company expects to save 300,000 euros a year by buying the shares.

In anticipation of the so-called "squeeze-out," Ford-Werke shares have more than doubled this year. An average of 17 shares are traded daily.

Small shareholders, mainly former Ford workers, spoke against the buyout. They said canceling the shareholders meeting would deprive them of a way of keeping in touch with the company.

"I'm not squeezed out, I'm crushed," said Dieter Kuhn, who has held Ford-Werke shares for 20 years. "You could have at least given us a model car as a going-away present instead of just a sketch of a car."

Zimmermann said the shareholders may want to buy shares in the parent company.

Ford-Werke isn't the only candidate for a squeeze-out in Germany. Stock in Audi AG, 99 percent owned by Volkswagen AG, has also more than doubled since September on speculation that Europe's biggest carmaker would buy out its luxury division's smaller shareholders. Audi shares have gained 32 percent this year, valuing the company at 8.8 billion euros.