Blog: Dave LeggettShrink to fit?

Dave Leggett | 23 January 2006

I watched David Cole (the US auto industry academic/guru) on TV earlier this morning being interviewed about Ford and he made one remark that stuck: the car companies are trying to shrink to a profitable base and grow from there. The question that statement raises is this: how far are companies prepared to go to follow that through? It can really be thinking the unthinkable when people have been trying to turn something around for years, huge resources have been invested and the proposal on the table is to walk away from all that, admit that the previous brave talk counts for nought. Time to move on. Not easy. It takes a crisis, but we have that now.

Would Ford really offload heavily loss-making Jaguar? Is recapitalisation less about commitment and more about keeping the patient on life support and ready for a buyer? Is Renault going to come back to the table with a better price? Will GM decide that it has too many brands and that Saab’s losses are too much to bear? We’ll see.

It does sound though as if DaimlerChrysler might well finally be prepared to bite the bullet and draw a line under Smart, with credible reports today that Goldman Sachs is acting in an advisory capacity that may include approaching potential buyers as well as screening unsolicited bids. One to watch. There could well be private equity groups who see potential in Smart (packaging bits for resale). Hard to see a buyer wanting to take the lot on as a going concern (how would they make it work where DC failed?), which is why Sachs is involved, I would assume. 

But today is mainly about Ford and what is coming this afternoon. One thing the company will definitely want to avoid is the accusation from the markets that it has not gone far enough in moving towards that smaller but profitable base from which future growth can follow. Can’t help feeling sorry for the guys and their communities at the sharp end losing their jobs though. Expect to see a few senior management bods ‘broomed’ also.

US: Large axe raised over Ford plants and jobs


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