Ford Motor’s decision to leave open the option of selling Jaguar and Land Rover separately may help the US carmaker attract buyers for the two luxury brands.
They share management, procurement and some other functions but have sharply different product portfolios and financial situations. And while Land Rover is understood to be profitable, Jaguar has been losing money for Ford for years...
The company on Tuesday sought to contain a growing backlash in the UK against the news that it had appointed advisers for the two brands’ possible sale.
In a memo to staff, Geoff Polites, Jaguar and Land Rover’s chief executive, urged employees not to “feel unsettled” by the question marks that had arisen over the two brands’ future.
“I’d ask you to ignore the speculation and concentrate on what we have to deliver in our business in 2007,” Mr Polites told staff on Tuesday. This should not “divert our attention from the tasks at hand” [ooh, such comforting words.]
Ford on Tuesday confirmed that it was “actively investigating its options” for the two marques.
“We are working with our financial advisors to determine the best future for Jaguar and Land Rover,” a spokesman said.
The news that Ford might sell either or both brands puzzled some observers, and surprised many of its luxury brands’ roughly 16,000 UK employees. While Jaguar continues to struggle with a revamp of its car portfolio, Land Rover has been chalking up record sales.
Eric McDonald, a senior organiser with the Unite union in Birmingham, said workers had been “very surprised” by news of the possible sale. “Senior managers were telling us they were not for sale,” he says.
Relations between unions and Ford have historically been tense. Production at Land Rover’s Lode Lane plant in Solihull was halted by strikes over pay in 2004; later that year, workers agreed to change working practices after Ford threatened to withhold investment.
As recently as March, Lewis Booth, who heads Ford’s Premier Automotive Group, said that the two brands were “not for sale.” People close to the company said Ford’s decision to unload the two brands was motivated primarily by the desire of Alan Mulally, chief executive, to fashion a more streamlined mass-market business.
Ford lost $12.7bn last year and executives have said that they expect to burn more cash as they seek to restore the company’s lossmaking US operations to profitability by 2009. “I think there’s a new management in the US who want to focus on the Blue Oval, and these overseas brands are an unnecessary distraction,” says a person close to the company.Land Rover and Jaguar sell only about 250,000- 300,000 vehicles between them and may be a distraction from Ford’s larger turnround effort.
“It’s about return on investment and whether you would be better off deploying management resources elsewhere,” says one Ford official.
Analysts said there were few obvious industry buyers for the marques among established companies, although one of Asia’s emerging carmakers might be interested.
Private equity investors are widely seen as likelier buyers following last month’s $7.4bn sale of Chrysler to Cerberus. That sale and Ford’s auction of its Aston Martin brand in March drew interest from several other buy-out groups, including Blackstone and Permira. A private equity buy-out would be viewed with deep suspicion in the West Midlands, home to most of the Jaguar and Land Rover plants.
The hostility of trade unions and the public contributed to the failure of a bid by buy-out group Alchemy for Rover Cars in 2000. Lord Bhattacharyya, the Labour peer and manufacturing expert, said on Tuesday that he strongly opposed any sale to private equity investors. “If Ford could not make Jaguar profitable, then how can private equity?” he says.
“We are opposed to private equity investors buying [Jaguar and Land Rover],” Mr McDonald, the trade unionist, says. “They close pension schemes, make people redundant and strip assets. We would resist that sort of buyer.”
Lex thinks this move is is based on Ford's wish to move away from a $ to $$$$$ product line to concentrate on a more mass-market clientele:
Why now? It appears that Ford is finally prepared to bite the bullet and consider selling Jaguar and Land Rover from its luxury stable, Premier Automotive Group (PAG). Ford has clung to its vision of an automotive company that can serve the very high-end customer along with the huddled masses through thick and thin. It has been mainly thin pickings along the way.
The company does not break out financial results for the separate brands, but Jaguar has needed far too much attention from a company that is already stretched to breaking point at home. Admittedly, the nurturing is starting to pay off. Jaguar, which had been plagued by quality issues, has seen a dramatic improvement in recent years, with the famous marque getting favourable reviews by the influential JD Power surveys. In the first quarter of this year, there was even some cheering news on the financial side, when the company reported record profits at PAG.
The Guardian notes that Ford's labor unions are seeking an audience with Ford over these sales:
Trade union leaders representing 15,000 workers at Jaguar and Land Rover were seeking urgent talks with the management yesterday over the future of the two car brands.
The move came as the parent company, Ford, confirmed that it had appointed investment bankers to advise it on the future of two of Britain's best known names. Concerns that Ford is seeking to sell Jaguar and Land Rover have led to calls for the government to intervene to safeguard their future.
Dave Osborne, car industry national secretary for the Unite union, said: "We have been pressing for assurances for the future from Jaguar/Land Rover and will redouble those demands now..."
Land Rover employs 8,300 workers, mainly at its Solihull and Gaydon facilities. Jaguar has a workforce of 7,300 concentrated at Castle Bromwich, Whitley and Halewood on Merseyside, where it shares production with Land Rover.
The close ties between the marques makes it more likely they would be sold together but industry sources say there is far more interest in Land Rover, which has had record sales of late, than in Jaguar.
Several car manufacturers have already said they are not interested in buying the brands, leading to speculation they could be sold to private equity interests.
The Labour MP John McDonnell said: "I am calling on the government to intervene to prevent this sale, which could result in huge job losses and the consequent impact on those local communities affected."
Up next we have news that Toyota may have surpassed General Motors in terms of automobiles sold last year, according to a tally by Automotive News. Though Toyota is on track to beat GM in worldwide sales this year, the honor of being the world's largest automaker may have passed to Toyota in 2006, not 2007. CNN Money says it has something to do with Chinese minivans, of all things:
General Motors may have lost its long-held title of world's largest automaker to Toyota Motor earlier than previously reported.
Toyota (Charts) edged ahead of GM (Charts, Fortune 500) in total sales in 2006, according to a recent ranking by a leading industry journal, which drops some of the Chinese sales previously credited to GM.
Detroit-based weekly Automotive News, which releases a sales total in late June of every year, showed GM with 8,679,860 vehicles sold in 2006, up 3.6 percent from 2005, but 128,000 behind the Toyota's sales estimate of 8,808,000. Toyota's global sales gained 8.5 percent from a year earlier in the publication's latest rankings.
"A little-known Chinese microvan played a role in Toyota's victory," said the magazine in a report on its Web site.
In its final tally for 2006, GM included the seven-seat microvan sold under the Wuling brand in China, which saw sales of 420,140 vehicles. But GM owns less than 50 percent of the three-way joint venture with China's Shanghai Automotive Industry Corp. and Liuzhou Wuling Automobile, so Automotive News credits those sales to Shanghai Automotive, which it said owns a 51 percent stake in the joint venture. That leaves GM's global sales just a hair behind Toyota...
GM Chairman and CEO Rick Wagoner has said that hanging onto the No. 1 sales ranking isn't a priority, but that it's also a distinction GM won't give up without a fight.
No matter which company held the title for No. 1 automaker in 2006, it's clear that Toyota will surpass GM this year, due to stronger global sales growth than the U.S. automaker, which had held the top spot since 1931.
Toyota already has taken the lead in the global sales in the first quarter of this year.
Toyota had sales of 2.35 million cars and light trucks in the first three months of the year, compared to 2.25 million at GM.
The sales forecasts from the two companies suggest that Toyota will not give up that lead the rest of the year. And industry analysts say that GM is not likely to overtake the faster sales growth at Toyota in future years without the acquisition of another major automaker by the troubled U.S. automaker...
At the time the first-quarter sales showed Toyota moving into the lead, GM spokesman John McDonald said the ranking was less important than GM being a successful and profitable automaker.
"There's a focus on competition with all the global manufacturers, not just Toyota," he said at that time. "There's room for more than one successful automaker in the world. We're not going to let that rivalry distract us from what we need to do globally."
