Ford Flags: Flogs Jags

June 13, 2007

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Ford’s survival strategy is becoming clearer. It is back to basics. Not quite ‘any color but black’, but also no distractions from the luxury sector of auto manufacturing. So Jaguar is up for sale. As in the recent Chrysler battles, equity capitalists are on the alert.

Ford needs an injection of cash big time, short-term. In the UK, attention is focused on the much loved Jaguar marque, and the original Chelsea tractor that is Land Rover. At the moment both products are losing money, contributing to Ford’s short-term cash crisis. The break-up and sale of its luxury subsidiary, Premier Automotive Group (PAG) is widely anticipated.

Land-Rover has made admirable productivity gains after a confrontational ‘last chance’ warning for its Solihull plant by PAG chief Mark Field, three years ago. It is currently in better shape than Jaguar and moving towards profitability. In the US the Jaguar marketing has been spectacularly unsuccessful, and is seen as too obviously a Mondeo in disguise.

Jaguar and Land Rover would have attraction as stand-alone acquisitions, but disentaglement would be difficult. PAG also has the profitable Volvo operation, which is more distinct, and more profitable. In strategy terms, the likely outcome is for Ford to move quickly for short-term cash reasons to divest itself of the various bits of PAG.
According to The BBC,

Under chief executive Alan Mulally, it is all hands to the pumps in the US, where Ford is focusing all its resources on rebuilding the Blue Oval as a brand after losing more than $12bn in 2006 …

One industry insider has suggested that the Renault Nissan alliance headed by Carlos Ghosn is likely to be interested. However, if as seems likely, the sales go through, Private Equity Partnerships will most likely be involved. Magna, the Canadian automotive components firm, which recently failed in its efforts to buy Chrysler, has already been mentioned.

Like real-life vultures, these raptors have a useful function in the Darwinian scheme of global survival of the economically fittest.


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