Ford close to sale of Hertz rental car unit, executives say

DETROIT — Ford Motor Co. is near a deal to sell its Hertz Corp. rental-car division, a move that would help the struggling automaker raise cash, two executives familiar with the negotiations said Thursday.

Ford is expected to sell Hertz to one of two competing groups of corporate buyout firms but hasn’t selected which one, according to the executives, who requested anonymity because the deal wasn’t yet complete. Hertz could sell for as much as $15 billion.

Ford was expected to announce its decision as early as Friday, one of the executives said. A Ford spokeswoman wouldn’t comment Thursday.

Two groups of firms are competing for Hertz. One is made up of The Carlyle Group, Clayton, Dubilier & Rice and Merrill Lynch & Co., while the other is made up of Bain Capital, The Blackstone Group, Texas Pacific Group and Thomas H. Lee Partners.

Ford announced in April that it was considering shedding Hertz, which it has owned since 1994, in an effort to focus on its core automotive business. The rental unit has been a solid contributor to Ford’s bottom line, posting revenue of $8 billion last year.

Kevin O’Mara, an expert on private equity investors with the law firm of Cadwalader, Wickersham & Taft, said the sale makes sense for Ford, which has been struggling with high labor and health care costs and faltering sales of its popular sport utility vehicles. Ford’s second-quarter profits fell 19 percent to $946 million.

O’Mara said buyout firms often acquire companies because they think they can make them bigger players in the market. But since Hertz already is the world’s largest general-use car rental agency, the firms involved in this case will likely try to streamline Hertz’s management and then take the company public, O’Mara said.

Hertz also is an appealing acquisition for investors because of its relatively stable cash flow, he said.

Even with a sale, the ties between Ford and Hertz won’t be completely severed. In July, Hertz agreed to continue buying and promoting Ford vehicles through 2010. Under that deal, Ford promised to pay half of Hertz’s advertising costs each year through 2010. That agreement will give Hertz’s new owners less leeway to negotiate with other automakers.

•Meanwhile, Ford announced a series of executive changes on Thursday aimed at restoring profitability to its North American automotive operations.

Mark Fields, who previously oversaw Ford of Europe and the Premier Automotive Group, was appointed president of The Americas, leading the No. 2 U.S.-based automaker’s largest business operation, which includes the Ford, Lincoln and Mercury brands.