Ford might sell off Hertz

UPDATE This rumor is upgraded to 'fact' today. Ford Motor Co. agreed to sell Hertz Corp., the largest U.S. car-rental company, to a group of buyout firms for $15 billion. Investors the Carlyle Group, Clayton, Dubilier & Rice Inc., and Merrill Lynch & Co.'s buyout unit will pay $5.6 billion in cash for Hertz and assume $9.4 billion in debt. Financially strapped Ford, which is being pummeled by increasing competition from rivals such as Toyota and labor woes, this year had been considering other options for Hertz, including taking the rental-car company public, to raise much-needed cash.

But the automaker, which has been unprofitable three of the last four quarters and reported a loss of $907 million from its North American automotive business in the second quarter, wanted to reduce debt, and the Hertz sale provides Ford with more money more quickly than a public offering would have. The deal is expected to close by the end of the year.

"The transaction provides a strong value to Ford," said Becky Sanch, a Ford spokeswoman. "It provides upfront cash proceeds and it eliminates the risks associated with an initial public offering."

04/21/05 Ford Motor Co. held out the prospect on Wednesday that it might sell its profitable car-rental business, the New Jersey-based Hertz Corp. — a move that could generate a lot of cash to improve the automaker's balance sheet. Hertz, which also rents trucks and equipment, earned just under $500 million in pretax profit last year and about $33 million in the first quarter of 2005, up $40 million from a year ago, Ford Chairman and Chief Executive Officer Bill Ford said in a conference call. But with rest of this year expected to be fiercely competitive for Ford Motor, and the likelihood of a loss in the second quarter, Bill Ford acknowledged that the company was exploring whether to change its relationship with Hertz. That could mean selling it outright, selling part of the company or some other new arrangement. The idea seemed to generate a lot of interest by industry analysts on a conference call with Ford. "Hertz is a great, well-managed business, and as a result of their strong performance and our continued de-emphasis of selling vehicles to the daily rental companies, we are beginning to evaluate long-term strategic objectives for Hertz," Bill Ford said during the call. "We can't share all of our plans with you today," he said, "but we can tell you that we have plans and we'll be rolling out our plans to you as it makes sense over the next several months." Detroit Free Press

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