Ford Motor Company

Case Study Analysis on Ford Motor Company's Value Enhancement Plan

MP130** | Name |

71 | Mr. Vivek Banka |

59 | Mr. Somen Dutta |

30 | Mr. Kumar Amitabh |

18 | Mr. Ashutosh Prasad |

Submitted by:

A) Case summary

Ford Motor Company

* Ford motor company is founded by Henry Ford and 11 investors in1903

* By 1906 henry ford had acquired a majority position in the company stock

* In 1956 ford sold share to public.Untill then Ford family and ford foundation had been company sole stock holder

* Ford foundation pressured company to create a public market for ford common share so that it could sell share and reduce its reliance on income received in the form of dividend, Class A share sold by the ford foundation became voting common share.

* Ford modified its ownership structure of multiple share classes in order to preserve family ownership.

* Class B share has special voting right and it could be owned by only ford family member. As long as they owned minimum no of class B share they could owned 40% of voting power.

* Class B share sold outside the family member is reverted back to common share.

* Ford family prefer dividend despite the fact that dividend were tax inefficient.

(B) Problem identification:

a. Does ford have too much cash?

b. How does VEP work

c. What are alternative for distribution of cash

d. What problem VEP is design to solve?

e. From share holder perspective how would we approve VEP

(C) Analysis

1) Various indication of too Much Cash are as follows:

* Excess fund signalling to market that company had limited investment prospect lined up

* Although cash balance some time desired, this only enough to meet short term obligation

* However ford excess fund reflect lack of better option to manage rather than requirement

* However ford had managed to acquire other auto maker in past but it has lack of opportunity in present.

* It clearly indicates that...