NEWSWIRE - September 15, 2000

Source: "Ford Announces Stock Buyback of $5 Billion," by Norihiko Shirouzu, Wall Street Journal, Friday, September 15, 2000, page A3.

Synopsis of Article: Ford Motor Company and Bridgestone/Firestone, Inc. have received substantial press coverage recently due to problems with Firestone tires installed as standard equipment on Ford’s popular Explorer SUV. Since the announcement last month of a recall of several tire models, Ford’s stock price has declined by 10 percent. This article reports Ford’s announcement of a $5 billion stock buyback program. It provides an opportunity to discuss share repurchases, the reasons for repurchases, and the resulting impact, if any, on share prices. Given the substantial attention that Ford is receiving due to the Firestone tire problems, the share repurchase announcement also presents agency issues as questions arise over Ford’s potentially conflicting loyalties to stockholders and customers.

Questions and Teaching Note:

1. Why would the management of a corporation decide to repurchase stock?
2. Why is Ford Motor Company repurchasing stock?
3. How does Ford’s planned stock repurchase relate to agency issues between management, shareholders, and customers?