Ford Family Saved Dynasty

DEARBORN -- The press release dubbed it an "innovative and unprecedented" move to reward Ford Motor Co. shareholders with stock or cash from the automaker's bulging financial reserves.

But the long-term effect of Ford's "Value Enhancement Plan" of 2000 extended far beyond doling out new shares or cash windfalls to loyal investors.

In one bold stroke, the plan cemented the founding Ford family's control over the world's No. 2 automaker, and guaranteed that the dynasty started by Henry Ford would continue into the 21st century.

Besides receiving $1.4 billion worth of new common stock, the Ford family retained the crucial 40 percent voting rights conferred on their Class B shares when the company went public in 1956.

The plan, commonly referred to as the VEP, gave shareholders the option of receiving $20 in cash for each share owned, or new stock of equal value.

But the 62-page document also reaffirmed the extraordinary powers of the Ford family's 70.9 million shares of Class B stock -- including the exclusive right to approve a merger, sale or liquidation of the company.

With the issuance of millions of new Ford shares, the family's Class B stock now accounts for only 3.7 percent of the company's total equity, down from 4.9 percent before the VEP.

Yet even as their ownership stake declined, the heirs of Henry Ford kept their ironclad hold on the Class B stock's 40 percent voting power.

"That (VEP) transaction, while beneficial to all shareholders, was most beneficial to the Fords," said Scott Hill, an auto industry analyst with Sanford C. Bernstein & Co.

Ford Chairman Bill Ford Jr., the great-grandson of Henry Ford, defended the VEP as a boon to all stockholders and not just the Ford family.

"The family was treated just like any other shareholder," he said. "I believe it was an unfair criticism. Others clearly saw it differently."

At least two major shareholders saw it very differently.

In a proxy statement, the...