Ford Vep

Have a little read: ... Ford plan: Value Enhancement Recognizing that firm market value is shaped by the investor's expectations of the firms' prospects, and that the market is composed of a variety of shareholders, with differing criteria of how value is derived, this report will detail how the Ford VEP plan added value by satisfying the needs of the various shareholder types within the context of the 2000 market environment. Corporate Strategy: the enhanced value for Ford Motor Company With a corporate strategy that was refocusing attention on automotive and financial services the Visteon spin-off would allow Ford to negotiate the lowest cost deals with any parts supplier, which would lead to lower costs and increased profit margins. Ford must have also recognized that the surplus $23 million of cash was reducing profitability ratios like return on assets and return on equity which in the mature and competitive automotive industry would be quite significant. Furthermore in

Product type: Case (Library)

In April 2000, Ford Motor Co. announced a shareholder Value Enhancement Plan (VEP) to significantly recapitalize the firm's ownership structure. Ford had accumulated $23 billion in cash reserves and under the VEP would return as much as $10 billion of this cash to shareholders. In exchange for each share currently held, the plan would give stockholders one new share plus the choice of receiving $20 in either cash or additional new Ford common shares. Shareholders electing to receive cash would be taxed on these distributions at capital gain rates. Among other things, the plan provided a means for the Ford family to obtain liquidity without having to dilute their 40% voting interest (even though they own only 5% of the shares outstanding). Students must wrestle with the following questions: Why was Ford proposing this transaction instead of a traditional share repurchase or a cash dividend? How did the interests of the Ford family factor into this decision, and...