Filed under: Plants/Manufacturing, Ford, Jaguar, Land Rover, Earnings/Financials
Ford fears add complexity to Jag and Land Rover bidding
Those of us outside of Ford have little idea about what Ford is really planning to do with its remaining PAG brands, Jaguar, Land Rover, and Volvo. If nothing else, it does seems clear that Ford wants to get rid of Jaguar and Land Rover at something above fire sale prices, and it would like to keep Volvo if it can find the money and concentration to run it properly. When it comes to Jag and Rover, the surprising revelation is that even the companies bidding for the British marques have little idea about what they're getting.
Names of potential bidders continue to bob up, the latest being American equity firms TPG and Ripplewood Holdings. But Ford hasn't given any of the bidders a complete financial picture of Jaguar and Land Rover, nor have any of the bidders even been allowed to visit the factories or speak to senior management. Potential buyers have also been told not to bid if they plan on closing factories or moving production out of Britain. We can't help but think these are odd constraints to place on such a potentially large transaction -- up to $8 billion, according to some estimates. Bidders are being asked to stump up for two companies they know little about, including one that has lost a fortune, and that they cannot change them in drastic ways to render them profitable.
Ford is ostensibly worried about damage to its reputation if it relinquishes the two hallowed names to slash-and-burn overseers. Ford is the number one selling brand in Britain, and doesn't want residual anger over its treatment of Jag and Land Rover to affect its position. If this sale is a 15-round fight, we're only in Round 3 -- and it look like it's going to be a long, fascinating match all the way to the end.
[Source: Detroit News]
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Reader Comments (Page 1 of 1)
Ian 9:54AM (7/23/2007)
I doubt that Jaguar can keep it's manufacturing pace in the UK and compete worldwide. Ford should have moved a large piece of the production to the USA already.
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Stuart 11:28AM (7/23/2007)
Why USA exactly. If I were to build another plant it would be australia or something. USA would be the last place on my list. Better yet I would rather just stay in the UK because they are one of the best at assembling cars.
The UK is the second biggest market in Europe (First being german which is dominated by Volkswagen and Mercedes). The moment they mess with these brands they will really suffer like peugeot when they moved production of the 206. The peugeot went from 3rd best selling car to almost non-existent. If that happens to ford then they better start worrying because currently they lie at first, second, third with all their cars in the top twenty somewhere.
Mr. Oak 12:05PM (7/23/2007)
Jag can keep their plants in the UK. They just won't be as profitable.
The real problem with Jaguar is product, not production. Yeah they nicely appointed cars, they're just so damn archaic, old as hell.
The X Type's as is was okay for Jag's entry into that market segment. That would have bought them time to build a proper entry level Jaguar. After all, if you were to skin this cat, It's just a tarted up Mondeo It's replacement should have been on the drawing board before that thing ever hit the showrooms.
The original S-Type was successful because it's lines were radically different, it stood out in a crowd. The replacement is a flop because it became a part of the crowd. The older car looks fresher that the current gen S.
The XJ. Dates back to flintstones. Let it go. Move on.
XK - Just a mere knock-off of the Aston Martin coupes.
Mr. Oak 12:07PM (7/23/2007)
Jag can keep their plants in the UK. They just won't be as profitable.
The real problem with Jaguar is product, not production. Yeah they nicely appointed cars, they're just so damn archaic, old as hell.
The X Type's as is was okay for Jag's entry into that market segment. That would have bought them time to build a proper entry level Jaguar. After all, if you were to skin this cat, It's just a tarted up Mondeo It's replacement should have been on the drawing board before that thing ever hit the showrooms.
The original S-Type was successful because it's lines were radically different, it stood out in a crowd. The replacement is a flop because it became a part of the crowd. The older car looks fresher that the current gen S.
The XJ. Dates back to flintstones. Let it go. Move on.
XK - Just a mere knock-off of the Aston Martin coupes.
Ian 9:59AM (7/23/2007)
Also just because Ford didn't do their proper "due diligence" when they fst overpaid for Jaguar (superb job John) they should expect new buyers to do the same.
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Tool 10:11AM (7/23/2007)
It sounds like Ford has placed a lot of constraints on this transaction; some of them make sense and some are ridiculous. Whatever happens and whoever assumes ownership of these iconic brands are going to have to restucture and turn this business around.
Of course, they should still manufacture in the UK. But if there are too many constraints, it may actually force its ultimate demise if the new owner can't do what is necessary.
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omar 10:57AM (7/23/2007)
Ford is going to end up having to sell Volvo but maintaining a small stake in the company. The best bet is for Ford to sell Volvo to the Wallenberg of Sweden so that they could continue to share technology.
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Mal Fuller 11:24AM (7/23/2007)
What Ford seems to be looking for is a buyer for these iconic brands that won't look too closely before they buy. In other words, a buyer who won't give it any more thought than Ford did when they bought these beleaguered turkeys.
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Stewart McKee 11:29AM (7/23/2007)
BMW suffered by making the same mistake, when it bought Rover. Paranoid about a losing its brand appeal in the UK, by taking a heavy handed approach to restructuring Rover, it lost the lot. If it had sorted out Rover engineering, production and management 'back home', the brand would be a success story today.
It's also debatable how much UK 'value' remains for Ford to protect. The Jaguar and Land Rover brand names will always be British but most component production has long since left these shores!
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Robert 12:22PM (7/23/2007)
I think you're looking at this from the wrong perspective. Ford needs cash infused into the brands, correct? Basically, it's looking to off-load part of its ownership. There is little indication it would sever all ties unless an established auto company bought it. And an auto company might be more likely to, for example, move production to a different location.
There was a decent piece on fomoconews a little bit ago about a potential strategy Ford is taking, and I don't disagree with it: namely, they want to turn their "extra" brands into more of a Mazda relationship where Ford develops technology and they can share/license it if they want or develop completely separate platforms and derivatives if they want.
It makes sense. Jaguar will have to survive on its own merits. It is probably finally in a position to pass that test after years of cost cutting and restructuring now coupled with a good product.
Most importantly, Ford's engineering group will not have to develop new technologies for Jaguar or be diverted by the need to design new cars for Jag (all of this applies to LR as well), but instead they can focus on making their brand tops. There are really very few brands that appear on every continent, and Ford is one of them. Strengthen that brand, focus on it, and you will recover (see FoE).
Now, what is unclear is what their plans for Volvo really are. It is quite possible they will do the same thing, but Volvo is, in fact, more integrated in the product development process, and a sale would probably hurt their financing as Volvo's name is part of the mortgaged assets.
The way I see it is that Ford is trying to discourage a random auto company from plucking the name and then trying to do what Ford tried to do and instead attract capital to buy a share of Jag/LR (a majority share at that) and leave Ford with, say, 20-30%. Ford gets cash. Jag/LR will probably get cash from the buyer. The plants will probably remain in England. Jag/LR will develop cars independently of a controlling hand like they should have been doing. Ford can continue to help their quality and provide them with technology. It's probably the best scenario.
Now, I have no inside information and nothing to go on except rumors and rumblings, but if I were Mulally, that's what I'd be trying for because it keeps Ford positive in the eyes of Brits, let's Jag and LR succeed or fail of their own accord and let's the companies share technologies without forcing Ford to divert a lot of attention from its problem: the Ford brand.
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Avinash machado 1:12PM (7/23/2007)
It would perhaps be best if Jag and LR are nationalised. The UK government should just pay a fair amount to Ford and take it off their hands. They certainly will be able to find a lot of bureaucrats to run the company.
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Mr. Oak 1:25PM (7/23/2007)
Yup, that's the way to go. Remember British Leyland?
Avinash machado 1:33PM (7/23/2007)
British Leyland was pathetic. It eventually became the Rover group which collapsed just a few years back. When it was owned by the government it put out some of the worst cars ever.
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ebm14 5:04PM (7/23/2007)
I think Ford should pitch Pharm. companies such a Merck
or Phizer to invest because it is depressing to see these companies fall a part.
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Andrea 9:28AM (7/24/2007)
http://www.ja4x4.co.uk
JA4x4 Land Rover Specialist, vehicle sales, service and repair, refurbs, rebuilds, speciality vehicles - race preparation. Series Land Rovers a speciality.
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Spiel 8:56PM (7/24/2007)
Owning a newer X-Type, I'm a little concerned as to the fate of Jaguar. Personally if Ford is unloading it, then I would like to see it unloaded to someone who will not ruin its image or affect development and production. I actually saw good in Ford's ownership, as evident in the S-Type and X-Type, so I think it's a shame it is being sold.
As for moving it out of the UK, I completely disagree. I believe this will be a huge mistake that will cost Jaguar and LR their image and affect sales dramatically. I've seen this happen when I owned my Saab just 3 years ago. It started when GM unleashed the 92 and 97X (nothing but re-badged Subaru and Chevy) and when GM announced that production of the 93 will be moved out of Sweden. How can you call a car Swedish when it's no longer designed or manufactured in Sweden? Same applies to Jaguar and LR. A big factor when purchasing a car is the mystery or luxury associated with where it is manufactured. Personally, GM and Ford can design and build in the US the best and fastest cars in the world, I still would not pay a penny for them. Why? Because aside from the poor assembly by factories here, I like knowing my car came from across the Atlantic, be it Jaguar, LR, Saab, BMW, Mercedes, etc.
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Woody 6:53AM (8/14/2007)
It is always intriguing to read comment on a business from those who have no personal knowledge or involvement of what actually is at stake and how irrelevant most of their comment is: However:-
In my case I have personal in depth history of much of the whole Rover, Jaguar and Land Rover issue having worked for all three for a period extending 20 years. The Ford purchase of Land Rover was an entirley different scenario than the Jaguar buy. The Ford stewardship of LR has been exemplarary, and the company will build on its 2006 profit this year. In fact LR is significantly profitable now as a result of good product decisions, excellent marketing, new distribution procedures, powertrain commonisation with Ford/Jaguar, electrical sharing with Volvo and cross brand purchasing. IT infrastructure is entirley integrated with Ford and substantial restructuring of personnel has been a huge priority each year that Ford has owned the business. The grouping of Jaguar and Land Rover together has allowed commonisation of processes, procedures, and personnel which has allowed many thousands of redundancies over the 6 and half year tenure of LR. Ironically the fruits of all this integration are only just beginning to show, not least because the development cycle for new products is at least 5 years.
Jaguar has had radical reorganisation too in the last three years and new product plans are hopeful. The old guard of 1970's ex Leyland product planners finally left and a sense of realistic and contemporary vehicles relevant to 2008 plus rather than 1968 is underway.
For the future any purchaser needs direct access to a major supplier of powertrain which is both internationally legal and made to high standards of performance and endurance. PE can only secure this if the deal is a joint venture with another vehicle company with excellent powertrain capabilty. TATA and Mahindra do not have this, and if either become owners the future of JLR is likely to be very weak, unless either of these companies also deals jointly with a powertrain manufacturer too.
The bottom line is that Ford are caught between the customary rock and hard place. On the one hand,selling now sells a lean and developed business capable of delivering profit short and medium term, but unsustainably without true automotive engineering knowhow. On the other hand holding on to JLR means making a long term committment to the next generation of product investments, at a time when most of Ford cash is on loan from brokers.
A way out may be to sell the brands, and a share of the forthcoming profits in return for capital and cash for product investment whilst retaining some of the economies of scale that an alliance with Ford would give, including the powetrain availability from Ford enterprises.
This way out may offer clues to Ford reticences on sale conditions: They may realise that there is this way to preserve some earnings from investment to date, and to protect the jobs and brand equity.
If at worst the business are hived off with no conditions, than JLR will go the same way as Rover. By 2012 the business will struggle to remain crash and environmentally legal and will have to resort to planning minor product changes at a time when the market is dominated by all new cars every 5 years. Also with pressure to look for new powertrain to meet environment demands JLR could literally be made illegal as traders in major markets. This scenario then leads to complete closure by 2015.
Trust me this is not a fascinating issue, it is crucial to many peoples lives and the outlook is not good.
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