The writing was probably on the wall for Jaguar and Land Rover when Ford made that recent announcement that it was going back to a global platform strategy. But the signals at that time were not strong enough to be picked up.
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Now suddenly there is confirmation from Ford that its review is still in progress, and that it continues to review all operations globally, and all the dogs are barking.
We are just three weeks away from Ford closing the books on the first half of the financial year and if the core business in the US is still as ghastly as it has been, then Bill Ford and his boys are going to be looking at selling the furniture not just peripheral brands.
The conclusion of a deal for Chrysler – sold by DaimlerChrysler to a private equity house – has also been a stimulant for Ford. Private equity has become increasingly ambitious but until Cerberus actually pulled off the purchase no-one was convinced that such a complex and risky business could be absorbed by private money.
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Jaguar is the real villain of the piece in that it has been soaking up money for 17 years. It has lost money every year since Ford bought it off the London Stock Exchange – paying treble the then-prevailing price. Initially it was bundled for sale with anything remotely profitable in Ford’s Premier Auto Group. Unlike Jaguar, the siblings have been growing stronger to the point where Volvo, Land Rover and Aston Martin (now sold) are all now profitable.
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By GlobalDataThe profit from the Premier Auto Group in the first three months of 2007 (inclusive of a farewell contribution from Aston Martin) was a record for a single quarter – up US$250m on last year. Ford of Europe was up US$150m.
Then Bill Ford stood away from day to day management and appointed Alan Mulally from Boeing as chief executive.
At one point in the will-they, won’t-they sell PAG saga Mulally stepped up and said that he had never known a company with so little resolve and so much indecision. Coupled with the news that he was very impressed with the progress at PAG, the observation was thought to mean that PAG was safe.
After all, the losses of PAG – after exceptional charges – were improving steadily. Land Rover was getting exceptional acclaim for its new off-roaders, Volvo had the sector leader in European SUVs and Jaguar had announced a new direction in its design philosophy which had met with considerable approval.
The XJ was highly regarded but selling badly in its class because the retro look had been maintained a generation too long. The X-type and the S-type were both massively below volume assumptions.
Ford had tried putting specialist cars on global platforms and failed and a huge amount of money would be required for the Jaguar renewal to have its own platform.
And will there be financial buyers only? It seems so. Renault has ruled itself out; its own financial situation is deteriorating as volume and margin in Western Europe declines. Fiat is newly disclosed as an interested party but has departed. The company was told by advisers that whilst its trading situation is much improved, its finances are still not strong enough to bear the purchase of an unprofitable business without a downgrade in the credit rating.
Goldman Sachs, Morgan Stanley and HSBC have all been named in the swirling speculation as having been appointed to advise Ford. If the interest from private capital is considerable and there is urgency to make a decision, having a number of advisers on the job will be valuable.
The give-away to the speed required is contained in Ford’s code name for the disposal: Project Swift.
Rob Golding
