Company set to offload luxury brands

By JULIAN RENDELL

AutoWeek | Published 06/20/07, 7:59 am et
Similarities between Chrysler and luxury nameplates Jaguar and Land Rover might not be obvious at first. But the Mercedes-Benz fire sale of its U.S. business partner is being mirrored by Ford?s burning ambition to be rid of its British empire after 20 years of ownership.

After initial denials, Ford confirmed hiring investment bankers to assist in the sale of its British luxury brands.

?We?re working with outside financial advisors to determine the best future for Jaguar and Land Rover,? Ford spokesman John Gardiner said. ?We?re not ruling anything in or out. We?re investigating options in terms of all the possible actions.?

Though a sale announcement isn?t imminent, insiders believe Ford has descended to the depths of desperation that forced Mercedes effectively to pay private equity company Cerberus to take Chrysler off its books. Another similarity: Cerberus is among the suitors for all or part of Ford?s Premier Automotive Group.

Details are slowly leaking that Ford has been trying to sell Jaguar and Land Rover since January 2007. Fiat looked at buying both nameplates and rejected the idea; Renault-Nissan took a pass, and even Hyundai considered jump-starting its luxury portfolio by snapping up Jaguar.

BMW also reportedly considered buying Volvo, the Swedish piece of PAG. Ford says there are no discussions regarding a Volvo sale but that all options remain open.

The surprise among Jaguar and Land Rover staffers in the United Kingdom comes from the fact that in 2006, Ford mortgaged factories to raise $20 billion of working capital, a move interpreted as a reprieve for the Brit brands. In addition, Ford CEO Alan Mulally has issued regular denials that he wants to sell off the two subsidiaries.

What changed? The sale of Chrysler, giving instant uplift to Daimler?s share price, and the nearly $1 billion infusion Ford will see from the Aston Martin sale are two reasons for renewed impetus to sell.

Insiders feel that Detroit bosses, including Ford Americas chief Mark Fields and Bill Ford, have lost confidence in Jaguar and Land Rover, despite strong support for the two brands from Ford Europe chairman Lewis Booth. That leaves Mulally to make the tough call.

Both Jaguar and Land Rover are on the verge of investment-heavy new product cycles, which also weighs against the companies staying in the Ford fold. Ford needs to pump money into its U.S. models, and there isn?t enough cash to fund expansions of both British brands at the same time.

Land Rover has ambitious plans for a major makeover beginning in 2010, with a new family of aluminum-bodied Range Rovers and the rapid replacement of all its models. Land Rover?s switch to aluminum bodies also will require critical decisions on new tooling and factory space.

The money to get Jaguar?s striking XF sedan into production early next year is already allocated. But in 2010, the aluminum-bodied XJ is scheduled for a radical reskin, and the company hasn?t even figured out what to do with the entry-level X-Type.

This wearing cycle of questions with few easy answers seems to have finally exhausted the patience of those at the top at Ford. Such weariness is not confined to the U.S. side of the Atlantic, either. There are plenty of Jaguar and Land Rover people totally disillusioned with Ford?s management of the subsidiaries in recent years. So the disappearance of Ford might be greeted with cheers, though tempered by worries about the venture-capital alternatives. Sound familiar?