The Ford Family Sells

Since 1919. when Henry Ford bought out his minority stockholders, Ford Motor Co. has been steered only by Ford and his family. This week, Ford Foundation trustees announced that the Ford family will give up sole control of the company, turning the last family-managed industrial colossus in the U.S. into a public corporation. Early next year, when the Foundation puts on sale the first blocks of stock (nearly 7,000,000 voting shares), the family will yield 60% of the voting rights in Ford management to investors.

The Ford Foundation, the independent philanthropic giant created by the Ford family, has long been anxious to sell at least 15% of its immense Ford stock holdings to diversify its investments. When the Government last week decided that the Foundation, as a tax-exempt organization, would not have to pay a 26% capital-gains tax on the sale, one of the last barriers to the stock sale was removed. However, the Foundation's 3,089,908 Ford shares (88% of all Ford stock) do not include voting shares, which are owned exclusively by the Ford family. Foundation trustees thought that investors who bought its shares "should have voting rights. Furthermore, voting rights would substantially increase the marketability of the shares." Henry Ford's heirs and the Foundation's trustees agreed to a sweeping reclassification of Ford stock, which will give investors technical control over Ford's future, although the family will retain working control. But the change will bring royal returns to Henry

Ford's surviving heirs and members of their families.

Apart from the Foundation, the only other present Ford stockholders are 1) the family, which owns all the 172,645 Class B voting shares, plus 190,347 Class A non-voting shares, and 2) 108 key Ford executives, who own 42,140 non-voting A shares.

Three Classes of Stock. Under the reorganization plan each share of the present non-voting A stock owned by the Foundation will be exchanged for 15 new non-voting A shares. The Foundation will thus have 46,348,620 A shares. When the first block of 6,952.293 shares is sold to investors, the shares will become voting shares. Thus, non-family common stockholders (and Ford executives) will own only 14% of Ford stock at first but will exercise 60% of the voting rights.

The old non-voting A shares held by the family will be converted into a new Class B voting stock which will be entirely owned by the family: it will arbitrarily control 40% of the voting rights. Each share of the old voting B stock held by the family will be exchanged for 21 shares of the new B stock. Thus the family will get a 1.74% bigger stock equity in the company in exchange for relinquishing sole control. When and if the new B shares pass out of Ford family hands, they will be converted share-for-share into voting stock.

When all the present stock is exchanged and split, there will be 53,461,470 Ford shares outstanding. Including family-owned B shares and the common stock owned by the employees and to be sold to the public, there will be 14,065,143 voting shares at first (until the Foundation or the family decides to sell more shares). The family's 40% of the voting rights will automatically drop to 30% if its B-stock ownership falls below 2,700,000 shares. If and when fewer than 1,500,000 B shares remain, the family will no longer control a specified percentage of voting rights but will have one vote per share, like common stockholders.

"The Whole Road." Why did the Ford family decide to let the public share control of the company? A major reason, according to associates, was a realization that the era of the family dynasty has long since passed. The family felt that the public which buys Ford cars nowadays feels it has a right to know how much money Ford is making and to buy stock in the company if it wishes. The Foundation's original idea to sell non-voting shares (which may not be listed on the New York Stock Exchange) would have given investors only a token stake in the company, and might have held the stock below its true value. The family decided, in the words of a spokesman: "If you go this road, you might as well go the whole road. When you have strings on it, you fool no one at all."

Although the Ford family will become minority stockholders in their own company, they will be well rewarded for the loss of privacy. The Ford stock held by each of Henry Ford's surviving heirs (Mrs. Edsel Ford, Henry Ford II, Benson, William and Josephine Ford) will now have a market value of at least $388 million if, as Wall Street expects, the shares go on sale for around $60 apiece.

There was no doubt that investors would scramble for the stock when it reaches the market early next year. One big reason was the magic of the Ford name. But probably a bigger reason to hardheaded investors was the earnings of the Ford company. Some 400 investment houses, which will participate in selling the stock to the public, are already being flooded with orders to buy, no matter what the price. Board Chairman Ernest R. Breech reported last week that the company will earn more before taxes this year (an estimated $700 million) than it did in the entire 21 years between two world wars, 1919 through 1939. In fact, said Breech, Ford has already made a greater profit in the first three quarters of 1955 than in any previous full year.

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