Since Henry Clay Ford Jr. became CEO of Ford (NYSE: F) in 2001, billions of dollars in shareholder value have evaporated in the face of huge losses.To his, and the compensation committee's credit, Mr. Ford agreed on May 11th of 2005, to "forego any new compensation (including salary, bonus, or other awards) until such time as the Committee and Mr. Ford determine that the Company's Automotive sector has achieved sustainable profitability."
Ford then lost $12 billion in 2006 alone, and then another $2.6 billion in 2007. Now, the company is backtracking on its decision not to pay Mr. Ford until the company had achieved "sustainable profitability." According to a new agreement between the two parties filed as an exhibit to the latest 10-K, the company has "now agreed that Mr. Ford would continue to forego new compensation (including salary, bonus or other awards) until such time as the Committee determines that the Company's global Automotive sector has achieved full-year profitability, excluding special items. It was further agreed that the compensation Mr. Ford would have received begining in 2008 and future years but for the agreement to forego new compensation will be earned and paid when the Committee determines that the Company's global Automotive sector has achieved full-year profitability, excluding special items."
So "sustainable" has been changed to "full-year" -- a huge difference. A true turnaround of the company would involve sustainable profitability, not one profitable year. And having already lost a huge amount of money for shareholders, does it really make sense for Mr. Ford to start earning a salary/bonus the second the company earns a nickel for a full year? I don't really think so -- not if the decision not to accept compensation was a principled one.
What's the takeaway here for investors? I would argue that by changing "sustainable" to "full-year," Ford is essentially telling us that "We might be able to eek out a profit for a year, but sustainable? That's a whole different ballgame." If the board believed that a full-year of profitability would mark a return to sustainable profitability, this change would be unnecessary.
Given that, investors should take early signs of a turnaround at Ford with a grain of salt.
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Reader Comments (Page 1 of 1)
2-28-2008 @ 9:53AM
Joseph said...
Get rid of him!
Why have they let him stay so long?
If I were with a company and lost $12 BILLION I would RESIGN and leave the COUNTRY!
Stop supporting the perverts Ford!
http://www.afa.net/emails/transform.asp?x=ford_020408&s=browser&y=2008&m=02
http://www.boycottford.com/
http://www.mwtb.org/pages/YourName.php?id=10494
2-28-2008 @ 11:01AM
roudy11z said...
Mr. Ford and the board should be ashamed of their poor handling of FOMOCO. I'm sure they have rewarded themselves at the expense of us shareholders over these past few years.Let them explain this to their children and grandchildren or maybe the children already know if they are old enough to understand GREED!! RoudMan
3-01-2008 @ 6:38PM
Dietrich Fuller said...
If ford motor company can afford to lose 12billion dollars with no problem,then this is my plea to wlliam C. ford. would you please donate a 2008 Ford Explore to this single mom of an Autistic son 7yrs.old whom also enjoy TaeKwanDo but ,my 1993 Ford Explore HOOPTY! barely gets us there. Nevertheless, fords been faithful to me. I"d rather have a quality truck,than 12 billion dollars that will never give you any PEACE Maybe you guys never stop to count your blessing,your'e BLESSED and HIGHLY FAVORED! THank God for what you got,because you could be in my situation. remember, you see FAULT,God see ACCOMPLISHMENT. Be Blessed!