Ford to Acquire Budget Rent a Car

07/12/96

Ford Motor Company, in a move that contradicts the trend set by Chrysler and GM, has announced that it will increase its holdings in the car rental industry by acquiring Budget Rent a car. Ford already owns 100 percent of Hertz, and has owned non-voting preferred stock in privately held Budget since 1989 when it acquired them as part of a leveraged buyout.

Ford will record a $437 million second quarter after-tax writedown of its Budget investments as part of the transaction. The company will also recording a one-time, after-tax gain of $650 million from the recent sale of 19.3 percent of its Associates First Capital Corp in an initial public offering. The two one-time items will result in a $213 million after-tax second quarter gain, equal to $0.18 a fully diluted share.

The U.S. Federal Trade Commission and U.S. Justice Department must approve the deal before Ford can go through with it. Ford plans to purchase the Budget's common shares in a cash transaction.

Budget lost money in 1995, but Ford hopes it will turn a profit this year. Carmakers invested in the rental car industry during the late 1980s, using them as captive markets for their excess car inventory so they could keep factories running. GM agreed to sell its 29 percent interest in Avis Inc earlier this month, and Chrysler, meanwhile, is seeking to divest its two car rental subsidiaries, Dollar Rent-A-Car and Thrifty Rent-A-Car.

Paul Dever -- The Auto Channel