Ford Motor Co. is not likely to sell a controlling stake in its profitable finance arm given the difficulty of finding a generous buyer and the automaker's already ample cash reserves.
Speculation grew in early August that the US automaker might sell a majority stake in Ford Motor Credit Co. after Ford hired mergers and acquisitions banker Kenneth Leet to consider potential alliances and shave off unprofitable businesses.
Many of Ford's investors want the company, which faces a shrinking US market share and rising costs, to take its cues from crosstown rival General Motors Corp., which plans to sell its own finance arm, General Motors Acceptance Corp., by the end of the year.
But investors should not expect Ford to make any drastic moves, strategists said.
"Ford's management believes that the next round of changes will be enough and they don't have to put Ford Motor Credit up on the chopping block yet," said Brad Rubin, senior credit analyst at BNP Paribas in New York. "I think it'll be frustrating to the market."
Ford spokeswoman Becky Sanch said, "We have no plans to sell Ford Motor Credit," while adding that Ford will keep its options open. "You never say never," she said.
One of the thorniest issues for Ford in contemplating a sale is that it may have trouble finding a buyer who will look past Ford's - and Ford Motor Credit's - flaws.
"Could they (sell), theoretically? Maybe. But who's going to buy them?" said Ira Jersey, a US credit strategist at Credit Suisse in New York.
Ford's auto finance unit may also suffer from a comparison with GM's more diversified GMAC, strategists said.
"Clearly people are interested in purchasing auto receivables," said Erica Bergsland, an investment officer at Advantus Capital Management in St Paul, Minnesota. "But at the same time, GMAC, because it was better diversified, was more attractive," she added.
Fifty-six per cent of GMAC's income is unrelated to autos, Jersey said. One of GMAC's most profitable units, Residential Capital Corp., is even investment-grade, Jersey said. "Whoever buys (Ford Motor Credit Co.) is utterly reliant on Ford's prospects," he added.
Many strategists have a decidedly negative view on Ford's outlook - at least compared to GM.
Ford has relied on "reserve releases to pump up earnings, which probably can't be justified going forward. So you're going to see earnings go down. And then secondly, if we do have any weakness in the consumer, it really starts resulting in higher realised losses," Mr Bergsland said.
Besides the difficulty of selling, Ford also does not believe a sale is necessary, strategists said. One reason for Ford's shyness may be its cash reserves.
"They've got, you know, a gazillion dollars in cash, $20 billion plus, and I just think they think (selling is) foolish," Mr Rubin said, adding that GM needed the cash more than Ford needs it now
Unlike GM, Ford also doesn't have an investor like billionaire Kirk Kerkorian pushing for change, said Premila Peters, director of research at KDP Investment Advisors in Montpelier, Vermont.
Still, selling Ford Motor Credit could give Ford a better credit rating and lower the unit's borrowing costs, which have risen as its ratings were cut to junk status.
A sale would also please many of Ford's investors, who have been pressuring the company to accelerate its turnaround program, which it calls the Way Forward.
Ford said last week it would increase the pace of new product launches. It's expected to announce an updated Way Forward plan by the end of September.
If recent weeks are any indication, Ford's bondholders stand to gain from riding GM's coattails.
Bonds of Ford and its finance arm rose last week, not just because of Leet's hiring, but also because of the positive news from GM, Mr Rubin said.