Tatas in the running for Ford's proposed Mazda stake sale

13 Oct 2008

It is an unfavourable time for automobile manufacturers worldwide, especially for the once might Big 3 in the US. Not only are they mulling mergers among themselves and shedding workforces, they are also looking to offload assets that have been part of their portfolios for decades. (See: GM, Ford may drive into bankruptcy: S&P)

While General Motors and Chrysler discuss the possibilities of merging some of their operations (See: GM in talks with Chrysler, Ford), Ford, is considering selling part of its controlling stake in Japanese automaker Mazda. And interestingly, Tata Motors has been mentioned as a possible buyer.

Ford bought a quarter of Mazda in 1979, then increased that stake to 33.4 per cent in 1996 - giving it effective control - as the Japanese carmaker struggled with high debt and falling sales. These roles have now reversed as Mazda recovered to post record profit in recent years, while Ford has lost $24 billion since 2006.

Ford had approached Japanese trading companies, financial institutions and auto parts makers over the sale of its shares, Nikkei said. Mazda is also likely to buy back some of its shares, it added.

Though it's unclear how much of the 33.4 per cent controlling interest in Mazda would be for sale, reports say that Ford is looking at a broad range of asset sales ahead of big quarterly losses the company is expected to unveil later this month. Recently, it fired almost one-fourth the workforce at its Swedish subsidiary Volvo in a bid to cut costs. (See: Ford Motor axes 4,000 jobs at Volvo)

Unloading the stake would end an era in which the second-largest US automaker used Mazda to help groom executives including its incoming finance chief and its current head of North American operations. Ford faces a mounting cash drain as the US auto market sinks to the lowest levels since 1991. (See: US auto sales limp at 16-year lows)

While Japanese trading companies Itochu Corp and Sumitomo Corp have been named as possible buyers in the Nikkei English News report that first broke the story, India's Tata Motors also finds mention. If the latter does go ahead, it will mark its second major buy this year after the $2 billion-plus acquisition of British marquee names Jaguar and Land Rover from, coincidentally, Ford. (See: Tata Motors becomes new owner of Jaguar, Land Rover)