Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Ford's Next After GM's Jilted

After months of speculation, merger talks between General Motors (NYSE: GM  ) and Renault-Nissan (Nasdaq: NSANY  ) are being sent to the scrap heap. Speculation for the failure centers most on GM's activist investor, Kirk Kerkorian, forcing an otherwise unwilling bride to the altar, which would have resulted in a shotgun wedding lacking in any matrimonial bliss. Kerkorian owns just less than 10% of GM's shares and was looking to maximize his investment quickly.

Naturally, attention will now turn to Ford (NYSE: F  ) , another aging, ailing car spinster that's been making noises all year long about its future. The company's much-discussed -- and much-amended -- $5 billion "Way Forward" turnaround plan has not been able to gain any traction, so the storied Ford family has considered taking the company private. It's even been said that Ford and GM briefly discussed a merger. Yet as Renault-Nissan was batting its eyes at GM, it was still casting longing glances Ford's way, too.

Carlos Ghosn, head of the French car maker, had indicated Ford was its next piece of eye candy if the wedding with GM fell through, and Ford itself was reportedly receptive to the union. An alliance with Ford would appear to be a better marriage than one with GM, if for no other reason than finances.

As difficult a time as Ford has been having lately -- with sales of its previously popular SUVs and F-150 pickup trucks running off the road in the face of higher oil prices -- the company was less of a money-loser than GM. Actually, until this year, it had been making a profit. Earnings were $2 billion in 2005, though admittedly they were off from the $3.4 billion reported the year before. That all changed in the first half of 2006, however, as the company has lost more than $1.4 billion so far. GM, on the other hand, lost $10.4 billion last year, and it's racked up another $3 billion in the red for the first six months of this year.

Ford and GM, though, are not alone in feeling the pain. Daimler-Chrysler (NYSE: DCX  ) , which began the trend of foreign car makers pairing up with American manufacturers, has also found some bumpy roads; its September sales are expected to fall 13% from a year ago. And even Renault-Nissan has not had clear sailing in its pursuit of Toyota (NYSE: TM  ) , set to become the world's biggest automaker -- hence its willingness to make its corporate name even more of an agglomeration.

Ford would benefit from a merger through the shared purchasing efficiencies, while Renault-Nissan would get a stable of some respected name brands, including Volvo, Jaguar, Aston Martin, Land Rover, and Lincoln-Mercury. Not that they would necessarily be around long. Shedding some of these overpriced acquisitions is what many believe is required to stem the rising tide of red ink. Ford also has a plethora of idle factories that Renault-Nissan could use to churn out more cars.

Any difficulties that would arise from a Renault-Nissan-Ford merger would undoubtedly result from the Ford family being in the driver's seat. They control 40% of shareholder votes and would not easily share power, let alone relinquish it.

With the General Motors talks now up on blocks, we'll soon see whether a Ford merger gets the green light.

Drive in with these related Foolish articles:

Regardless of your investing style, the Fool has a newsletter for you. Check out our stable of newsletters with a 30-day trial of any or all of them.

Fool contributor Rich Duprey has 20 stocks in his CAPS portfolio. Think you can top his picks? Rate your own selections and get in on the fun!Rich owns shares of Ford but does not own any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 516215, ~/Articles/ArticleHandler.aspx, 10/25/2016 3:53:50 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,172.32 -50.71 -0.28%
S&P 500 2,143.75 -7.58 -0.35%
NASD 5,280.93 -28.90 -0.54%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/25/2016 3:38 PM
F $11.83 Down -0.22 -1.79%
Ford CAPS Rating: ****
GM $31.61 Down -1.38 -4.17%
General Motors CAPS Rating: ***
NSANY.DL2 $14.49 Down +0.00 +0.00%
Nissan Motor Co.,… CAPS Rating: **
DCX.DL $9.70 Down +0.00 +0.00%
TM $115.40 Down -0.05 -0.04%
Toyota Motor CAPS Rating: ***