The one thing I really have never understood is why Ford would go out of its way to protect a low level executive from being held accountable for insider trading allegations. James T. Young, as we know he was the one who allegedly proudly bragged about buying Ford stock based on insider information. You don't put an entire company at risk over one such person unless the rabbit hole goes deeper.
I believe it may go all the way to the Ford family itself.
In the words of Ronald Reagan, "here they go again." It all makes sense. Ford has been down this road before in their attempts to cover up alleged wrongdoing rather than face consequences for their actions. It all started in about 1999 and really even further back than that. It starts all the way back in 1989 before they ever released the Explorer SUV, the then savior of the Ford company.
Let me lay it out.
FIRESTONE
Ford Motor Company and its close ally Firestone Tires faced a serious crisis when many Ford Explorers equipped with Firestone AT/ATX tires rolled over as a consequence of tire failures. In 1999 the first fatalities occurred in Saudi Arabia and not much later similar accidents were reported in Venezuela. Ford immediately reacted by blaming the weather and vehicle owners for under-inflating their tires.
However, Ford also began replacing tires. It was not until March 2000 when a Ford Explorer rollover in Texas USA left one of the car occupants brain-damaged and paraplegic that the American authorities intervened, triggering a massive tire recall and a lawsuit brought by the victim’s family. The case was settled out of court in January 2001 (Bowe, 2001), but by that time many more cases and fatalities were reported and therefore neither Ford nor Firestone could continue blaming the weather or car owners.
Ford was trying to blame Firestone while Firestone, who readily admitted blame, was trying to say Ford was at least partially responsible because the Explorer was prone to rollovers. If you recall the Explorer replaced the now defunct Bronco II that did indeed have a history of rollovers. The Explorer was supposed to be safer and not prone to rollovers as the Bronco II was.
What nailed Ford is this from a TIME magazine investigation:
But a five-month investigation by TIME of Ford documents, which the company prepared for investigators and government lawyers, shows Ford's engineers were wrestling with the stability and handling of the Explorer even before it hit the market in 1990—as a sibling for the notorious bucking Bronco II, which cost the company approximately $2.4 billion in damage settlements. Previously undisclosed memos and e-mails show the extent to which the engineers were juggling decisions about the Explorer's suspension systems, tire pressure, weight and steering characteristics, plus its height and width, all of which could factor into a vehicle's stability.
Even Clarence Ditlow, Executive Director for the Centre for Auto Safety had this to say in his statement before the Senate Committee on Commerce, Science and Transportation in Washington D.C., September 20, 2000. He stated "Emerging Information shows that both Ford and Firestone had early knowledge of tread separation in Firestone Tires fitted to Ford Explorer vehicles but at no point informed the NHTSA of their findings".
While all this was going on Ford was advised by the Consumers Union, who did a tire evaluation for the Explorer that was used to evaluate real-world maneuverability, that the best tire for the Explorer was the Firestone P225 tires.
Ford then CHOSE on their own the larger P235 anyway. Marketed first as the ATX and then as the Wilderness AT, the P235 became the tire that Firestone later recalled.
This began a major problem for Ford.
Consumers lost confidence, stock price started to drop, Ford itself spent $2.5 Billion, all tax deductible business expense against profits, no real cash lost, all while admitting no wrongdoing of course, to replace tires.
FORD MONEY MACHINE
With their market share in free fall, the Ford stock price in the same mess because of their decisions, Ford got scared and made the situation much worse by abusing Ford Motor Credit their own financing arm. Ford Motor Credit's primary business is financing the sales of Ford's own vehicles. It also gives line of credit to its dealerships as well.
Without Ford Motor Credit they have no business. No dealerships and no vehicles.
Think they were worried about losing sales and needed to cover? They became so desperate they started doing aggressive questionable car repos against their own employees, and many more.
They were repossessing vehicles from their own employees even though the payments were automatically deducted from their paychecks at their own Ford plant. These cars were being repossessed and auctioned off before anyone could even get to a court to stop it. They would later "settle" quickly with these employees by agreeing to "write off" the difference between what they said was owed and what the car auctioned off for.
What did the employees then do? With their credit restored they went and bought....you guessed it, another Ford, and Ford Motor Credit financed it. Quick cash and a great new business for Ford from their dealing isn't it?
Many took that deal to avoid the cost of litigation, while others settled quietly with Ford, who then was able to avoid a class action suit.
That's just one more look at how cold and calculating this "All American Company" really is.
Why did they go so crazy? They needed cash to protect the family fortune and used extreme measures to benefit themselves. desperate people do desperate things and the Ford family decision makers are no different.
A company like Ford doesn't really care much about the auto building process itself, their real wealth comes from the financing arm of their company, Ford Motor Credit, now Ford Credit.
The auto manufacturing process is a built in push to their own financing arm. Employees buy the product, their family, their friends, and all are steered to borrow the money from Ford Motor Credit. That is why they get scared.
Shut down a factory? No problem as long as we still build cars. Shut down Ford Credit and they are out of business. That is one reason we outlined the debt Ford owes we the taxpayer last article.
The sequence of events thanks to their mishandling and intentional false advertising, that term becomes important in a moment, started Ford on a downward spiral they never recovered from.
The family fortune was being lost on a grand scale and it got worse with each passing day. Ford was in big trouble long before the economy tanked in 2006-2007 they just hid it. It all started with Firestone.
How important is Ford Credit to Ford Motor Company profits?
Ford Credit is the only one of the big three financing arms that is solely owned by the auto manufacturer itself. GMAC and Chrysler sold theirs.
2006 ONWARD
By 2006 Ford was screwed and they knew it. Imagine how beneficial it was that everyone else was struggling now too. Ford did have one Ace in the hole though during the 2000-2006 period.
Ford's own Edsel Ford II was not only the former CEO of Ford Motor Credit, he made the decision to go for the cash after Firestone, but Edsel was also Chair of the Detroit Branch of the Chicago Federal Reserve.
Wonder how Ford was able to get the bailout by the Federal Reserve passed when they needed it? Look no further.
By the end of 2006 however, things were still not looking great. Bill Ford had hired Alan Mulally to take over and though things were moving in the right direction Ford was still not making money.
In January of 2007, Ford announced a loss of $12.7 Billion in 2006. It was the worst year in its entire history. All the gimmicks they had tried, including Ford Credit repo'ing cars, had failed to date. In the short term anyway.
Ford lost $5.8 billion in the fourth quarter of 2006 alone. In the same period a year earlier, it lost a mere $74 million.
The company took in $160.1 billion in revenue in 2006, This was about 9 percent less than in 2005. The loss was even greater than their previous greatest loss in 1992. It surpassed the $10.6 billion loss posted by General Motors in 2005. The only reason they aren't on record as the absolute worst of all time is thanks to GM losing $23.5 billion in 1992.
Ford's market share had dropped from about 25% in 1995 to 15% in 2006. They were closing plants, getting rid of 30,000 workers and still not profitable yet. From first in market share to 4th overnight, Ford was done. At least temporarily.
Ford's stock had dropped from around $8 a share in February 2007, what would be considered extremely low at the end of 2006, to an anemic $1.93 in February 2009. All while carrying around $150 billion in debt. Their bread and butter was Ford Motor Credit and Ford Motor Credit was dependent on selling cars. Ford's lost market share put everything in jeopardy.
By April of 2007, it had already been reported that Alan Mulally had borrowed $23 billion and "mortgaged" the blue oval itself, in an effort to save the company. Everyone including Mulally had to know that the debt payment itself was unsustainable as we mentioned previously.
Why was it so important for Ford to market the lie that they didn't take a government bailout? They had to sell cars and they knew we the people are a patriotic bunch at heart and would buy them.
FORD STOCK AND THE FAMILY
The Ford family controls about 40% of the votes on the Board thanks to their Class B shares of stock. While most are familiar with common stock, the class B stock is basically a family owned bloc of stock that comes with much power. While the price of those shares is related to the price of common shares, the power that the Ford family itself wields essentially gives them "veto" power in decision making.
What class B stock does is essentially gives the right to buy it to family members only first. That way the family always has control. With the failures of Ford, the family had all the control, there is no one to blame and that is important to remember now with the insider trading allegations.
On April 21, 2007 the family met in Greenfield Village to explore their options. During the meeting it is reported that some family members were openly discussing selling their Class B super shares of stock and wondering what they would be worth. Now that they had driven the business bone dry they wanted to make sure they got to keep their money.
It is that simple.
In 1999, those Class B shares had a market value of about $2.25 BILLION. By the time the family met in April 2007 it was worth a paltry $578 million based on stock price.
The family was scared.
Reports say that Bill Ford left the room during these discussions but was told what occurred later.
Reports also state that Elena Ford, Bill's cousin, and Edsel's niece, stated she would buy the family shares if someone wanted out. Noble gesture? Doubtful, she was making sure the family kept control and allowed no outsiders the opportunity to negate them.
WHY INSIDER TRADING ALLEGATIONS ARE IMPORTANT TO FORD
Ford currently has about 4 billion shares outstanding. The so called Class B stock owned by the family is about 70 million shares and yet they have 40% voting power. ALL company decisions are made and controlled by the Ford family itself.
The real value for the family is their power to control every decision and that most certainly would include all decisions relating to maintaining share price and how to benefit from it.
It is not in the monetary value of the 70 million Class B shares itself at market price, it is the common shares they buy and sell on the open market just as all of us do. While the Class B shares guarantee they maintain power, the day to day common stock value is how they maintain their wealth.
Thanks to the bailout money the Ford family received to save the business, yes I said they received since they are the power of the company, they have rebounded, although it is a glass house rebound based on lies and deception.
Though not valued at what they were in 1999 when Bill Ford took over, the family is currently worth over $1 Billion so they have doubled what they were in 2007.
All thanks to our taxpayer money they have never repaid, with $17 Billion cash on hand, and they are not obligated to do so.
And that is why alleged insider trading concerns them.
Members of the Ford family are familiar with insider trading to some degree.
Elena's mother is Charlotte Ford who married her third husband, Edward Downe, Jr. in 1986.
Edward Downe, Jr was convicted of insider trading. In 1992, the Securities and Exchange Commission charged that in the mid- to late-1980’s Downe and associates exchanged inside information in order to make illegal stock trades. Downe was eventually convicted of charges including wire fraud, filing false income tax returns, and securities fraud.
All while married to Charlotte Ford and a part of the Ford family inner circle.
Downe, Jr was granted a pardon by then President Bill Clinton on Clinton's last day in office. A pardon that was granted by paying $11 million to the SEC, and Downe, Jr's former business partner, personal friend, and former Senate Banking Committee Chairman then Senator Christopher Dodd's personal appeal to Clinton.
So yes the Ford family is aware of what insider trading can do.
Who is Charlotte Ford? She is the daughter of Henry Ford II and the sister of Edsel II. Her daughter is none other than current Director of Global Marketing, and the first female in the Ford family to have an executive position, Elena Ford.
Elena Ford is the family member who volunteered to buy the family stock at the 2007 family meeting that would have given her more power. She has a current net worth of somewhere around $125 million.
Elena also was head of marketing and branding for Ford Credit. She joined Ford Credit in 2006 during the big meltdown days.
According to Forbes, the Ford family owns less than 2% of the company’s shares, but controls 40% of the voting power through a special class of stock. There are 71 million Class B shares, about three-fourths of which are held in a voting trust. The rest are held by individual family members. The family has a pact that Class B shares put up for sale will first be offered to other family members.
Patriarch William Clay Ford, the last surviving grandchild of Henry Ford, owned 9.5 million Class B shares, or 13.3% of the total, as of Feb. 1, 2010.
One year later, he was down to 6.7 million shares, or 9.5%. Bill Ford Sr.’s current stake, including an estimated 26.3 million common shares, is worth about $500 million.
His son, Bill Ford Jr., had increased his Class B holdings to 6.9%, from 5.8% a year ago by 2011. (He also owned 14.7 million common shares)
The largest owner of Class B stock is Lynn Alandt, a cousin of Bill Ford Jr., who owns 7.4 million shares, or 10.5% of outstanding Class B shares.
The Class B stock guarantees the Ford family maintains control in all decision making, but the real money comes from owning the common shares that any of us can buy.
While Bill Ford, Jr. was given stock by the company, while CEO etc, other family members were not.
There are currently at least 13 great grandchildren who benefit from the Ford family fortune.and stock. The Ford family has greatly benefited from the bailout by we the people by hundreds of millions, cumulatively with the buy and sell of stock in the interim, potentially billions, of dollars.
From 2006-2010, millions of Americans lost their homes, their farms, their jobs.
At least one person, James T. Young, is alleged to have openly bragged about buying stock based on insider trading. And Ford would protect one employee from insider trading charges? It defies logic.
30,000 Ford employees alone lost their jobs and their way of life.
The bakers' dozen that is the Ford family got bailed out at the expense of these Americans.
The family members themselves benefited from the sacrifices of all of us.
Ford has a history of withholding information and being deceitful. The Firestone debacle, the Ford Credit blunders, the lies about not receiving a bailout. They have proven they are untrustworthy.
Would they go to these depths to protect one low level executive from being charged with insider trading, or would they do all they can to protect the family fortune. Their history suggests the family always comes first.
With that in mind, just how many at Ford benefited from the alleged insider trading and is the family involved in the cover up?
That is why there is an investigation and we will know soon enough.
Stay tuned there is plenty more.
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