Wednesday, August 05, 2009

Whatever They’re Smoking, We’d like to Try Some

BHP Gets Jac of All Trades
—The Wall Street Journal, August 5, 2009

The “Jac” being referred to in the headline from today’s “Heard on the Street” is, of course, Jacques Nasser, the Ford veteran whose brief stint behind the wheel at Ford Motor Company helped put that once-venerable company in the break-down lane.

But you wouldn’t know that to read today’s Wall Street Journal.

Or, more accurately, you wouldn’t know it reading the online version of this morning’s article, which came out yesterday and differs slightly but materially from that which you read today.

The difference is the sentence we highlight in bold, which was deleted from the print version of today’s article:

Boardroom succession planning has been a problem for the global mining industry this year. Following botched processes at Rio Tinto and Anglo American, BHP has shown how it should be done. Jacques Nasser is a good choice to succeed Don Argus as chairman of the Anglo-Australian miner.

Mr. Nasser, on the BHP board since 2006, is best known for a stormy three years as chief executive of Ford Motor Co. earlier this decade. Mr. Nasser was ousted after falling out with Chairman Bill Ford Jr. But history has cast a more favorable light on his controversial efforts to modernize the car company given its subsequent near-death experience.

Exactly what that “favorable light” now shining on Mr. Nasser’s “controversial efforts” at Ford might be, we here at NMTU don’t have a clue.

When Nasser became CEO on the first day of 1999, Ford had $25 billion in cash and short-term investments, $78 billion in long term debt and $21 billion in retained earnings.

On the last day of 2001, the year he left, Ford had $18.5 billion in cash and short-term investments, $120 billion in long term debt and a mere $2 billion in retained earnings.

How did “Jac the Knife,” as he was known for his cost-cutting, help put Ford—then a 96 year-old company—in the fiscal emergency room in less than three years?

Well, paying almost $3 billion for Land Rover, for one thing. Buying Volvo for $6.5 billion for another. And then there was the $1.6 billion he spent for Kwik-Fit auto repair centers for a third.

Not to mention doing one of those dreadful “returning value to shareholders”-style $5 billion share repurchases consummated back when Ford’s stock was trading in the mid-to-high $20’s.

If those are the “controversial efforts to modernize the company” Heard on the Street was thinking of while drafting last night’s online version of the story, it must have been some pretty primo bud going around the newsroom when the original got drafted.

Thankfully—at least for the Wall Street Journal’s journalistic reputation—that sentence was deleted before it reached the print version, probably by a more thoughtful editor who wasn’t strictly taking his or her cue from Jacque Nasser’s C.V.

After all, every one of Nasser’s “efforts to modernize” Ford has likewise been deleted: Volvo is on the block; Land Rover was sold, along with Jaguar, for half the price after years of losses; and Kwik-Fit was blown out for a cool third of what Ford, under Nasser, had paid for it.

Oh, yes, and the company recently raised $1.4 billion by selling shares of stock.

At $4.75 a share.

As far as we can tell, Nasser wasn’t so great in “modernizing” Ford. But he was very good at buying high and letting others sell low.

Whatever it was going around “Heard on the Street” last night, we’d like some!

Jeff Matthews
I Am Not Making This Up

© 2009 NotMakingThisUp, LLC

The content contained in this blog represents only the opinions of Mr. Matthews.
Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. This commentary in no way constitutes investment advice, and should never be relied on in making an investment decision, ever. Also, this blog is not a solicitation of business by Mr. Matthews: all inquiries will be ignored. The content herein is intended solely for the entertainment of the reader, and the author.


Joe said...

I guess Bob Nardelli was unavailable.

Dirk said...

Wait, quick calculation. $5B in stock repurchase at (let's be generous) $20... that's 250M shares bought.

Sell them again at $4.75 gets you almost $1.4B (ok, it's only $1.2B, but the numbers are close).

That's a neat -75% ROI (likely worse as you said 'mid to high 20s')! Brilliant.

That man is a genius. I hope he'll run one of my competitors, soon!

PS: those are the posts that I love at NMTU


Anonymous said...

Jeff: After reading your post, I got to thinking about CEOs whose company stock imploded during their tenure (Nardelli at Home Depot, Nasser at Ford, Karmazin at Viacom - this list is endless). Have you noticed that these guys tried to "goose" their share price with debt-funded stock buybacks, which ultimately failed and led to their ouster?

I would think if a CEO announces a stock buy back, caveat emptor, as they say! I could be wrong, though...

Marty said...

This is what qualifies Jac to get another executive job, while thousands of people without such "impressive" performances pound the street looking for employment?