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Cash-rich carmaker surveys bargain stocks with takeovers in mind

While the collapse of the stock market may be a cause for panic among much of the business and financial community in the United States, it is creating an opportunity for others. Among those that could take advantage of the market's turmoil is the Ford Motor Company. Cash rich, the No. 2 US carmaker is accelerating its search for suitable acquisitions, according to key company officials.

As part of the recent reorganization of the company's executive suites, a new Diversification Planning Activity office was established specifically to examine potential acquisitions.

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As a measure of its potential significance, its new director, Bruce L. Blythe, will be reporting directly to Ford chairman Donald Petersen.

With stock prices down, the pace of the office's activities is being stepped up, notes David McCammon, Ford treasurer and vice-president for finance.

``There are better buys now,'' Mr. McCammon says. ``We don't jump just because the market is down, but I have to admit it's better to buy in the market now than it was 10 or 15 days ago.''

Ford, which earlier this week reported record third-quarter profits of $693 million, now has a contingency fund of $9.1 billion in cash and readily marketable assets.

(That does not include the $1.1 billion Ford spent earlier this month to finance a majority-share acquisition of Hertz, the car rental company.)

Rumors on Wall Street have linked Ford with a number of potential takeovers, including the Boeing Company, the defense and aerospace giant. Indeed, McCammon says, defense/aerospace is one area of interest for Ford, and the automaker is also looking for suitable acquisitions in electronics.

But the prime area of interest remains financial services. Financial operations, including Ford Motor Credit Company, accounted for 26 percent of Ford's net earnings during the third quarter, and have grown, on a percentage basis, even faster than automotive operations.

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``Financial services has been a major area for us,'' McCammon says. ``It is a big profit-provider for this company. Our finance and insurance business has had record profits 13 years in a row.''

In recent years, Ford has made several sizable acquisitions in this area, notably California-based First Nationwide Bank, the nation's seventh-largest savings-and-loan.

Within the last month, the automaker has also purchased US Leasing International, a California firm that provides businesses with leases on everything from office equipment to corporate jets. And it has a bid in for the troubled Financial Corporation of America, another California S&L.

Ford officials have said repeatedly that they will not pursue any hostile takeovers. McCammon cautions that while there are ``lots of discussions going on,'' Ford ``has nothing to announce'' at this time.

But even if the company does not take advantage of the down market to make any new acquisitions, it will be using its reserves in other ways.

Its cash war chest is funding an accelerated stock buyback program. As of the end of September, Ford had repurchased a total of 38.6 million of its own shares since 1985. The goal is eventually to reacquire 45 million shares.

That accelerated program should be complete by the end of the year, McCammon says, ``sooner than we would have expected,'' had the market held at month-ago levels.

Ford is not the only automaker using the downturn on the market to advance its stock repurchase program. On Tuesday, Chrysler Corporation vice-chairman Steve Miller said that during one two-day period alone last week, Chrysler bought back almost as much of its own stock as it normally would have during an entire month. General Motors is also accelerating its buyback program.

Chrysler chairman Lee Iacocca said the market slump could pose one serious problem for Chrysler: At ``$23 a share, our stock is a steal.'' But Mr. Iacocca said that while he might otherwise have been worried about corporate raiders setting their sights on the No. 3 carmaker, he believes the raiders have been hurt perhaps more than anyone else.

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