Did Ford (NYSE: F) just punch the eject button on Mazda? It sure looks like it.
Over the weekend, reports began surfacing that Ford will drastically pare its already drastically pared stake in its Japanese partner company, completing an ownership drawdown that began two years ago, and reducing Ford's stake in Mazda to a mere 3%. Asked to comment on the speculation, Ford issued the following non-denial denials:
On Friday: "Ford's ownership stake in Mazda remains unchanged."
And two days later: "We continue to have a collaborative relationship with Mazda."
Which I think you'll agree, does a great job of diverting the question without answering it. Having not yet sold the shares, the "ownership stake" of course "remains unchanged" today. And as for the continuing "collaborative relationship," well, Ford offered much the same reassurance back in 2008, when it dumped a 20% slug of Mazda stock. But why might Ford want to sell more shares now?
Change in the ashtray
Not because it needs the money. At current prices, the 8% Mazda stake would net Ford about $370 million, a sizable sum. But when weighed against the $11.5 billion in free cash flow Ford churned out last year, it sounds more like pocket change rattling around the ashtray.
The real answer, I suspect, is as simple as this: Ford doesn't need Mazda anymore. Once upon a time, truckmeister Ford relied on Mazda to help teach it how to build small cars profitably, and to lend Ford the imprimatur of "Japanese quality." But have you driven a Ford lately? JD Power and Associates has. In their latest Initial Quality study, Ford's got much better quality than Mazda today. For that matter, new Fords outperformed Honda (NYSE: HMC) and Toyota (NYSE: TM) while giving up only two places to Daimler's vaunted Mercedes brand.
Considering how far Ford has come, and the seemingly dead weight Mazda has become on the Ford brand, the question is no longer "why would Ford sell Mazda?" It's why wouldn't it?
For more Foolishness:
- Ford put Mercury on the fast track to Nowheresville.
- Tesla Motors is the new General Motors.
- And GM's IPO is destined to fail.
