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Ford Unlikely To Sell Jag and Land Rover

Posted by: David Kiley on March 14, 2007


With the sale of Aston Martin netting Ford more than $800 million, the attention turns immediately to whether the automaker will sell Jaguar and Land Rover, too, and get out from under the English Patients.

I doubt it. Merrill Lynch’s John Murphy said today that Jag and LR would probably only net the struggling automaker about $1.5 billion at best. Ford has been losing that much in the couch cushions. The real benefit to Ford wouldn’t be the relatively low amount of cash, but the enterprise savings of not having to manage the two brands globally, fund product plans, deal with the U.K. labor union at the Jag and LR plants, unload a lot of excess employees, etc.

“Globally” is the key word in all that. Ford managers are skittish about going into the next decade with only one global brand, Ford, and attacking the premium categories with just Lincoln. Lincoln may get a stretch across the pond as an experiment, but noone thinks it will bring home much cash. Jag and land Rover are true global brands and LR, especially, has big cachet in developing markets among Chinese, South Americans and Middle Easterners.

Ford is the biggest automaker in the U.K. And it’s tinkering with plans to bring some European product to the States. The economics of that is brutal given the cost of manufacturing in Britain and the currency exchange. By hanging onto Jag and LR and not selling them off to private equity, they have more with which to horsetrade with the unions on making more Euro exports to the U.S. economically viable.

PAG lost about $325 million last year. Sources tell me that Volvo was slightly better than break even. And if Aston Martin earned something South of $100 million, that means Jag and LR are down to the neighborhood of $300 million in combined losses. With fewer employees this year, and the new LR3/Freelander out and earning and the overall plan of getting the U.K. manufacturing and employee footprint more in line with sales volume kicking in incremental operational improvement, PAG could well find itself nosing into the black this year. Two more years of incremental improvements, and it could cease to be the albatross it was created to be under former CEO Jac Nasser.

Nasser engineered the Ford Europe miracle by saddling PAG with the Halewood plant, which built Mondeo-based X Types. The sales volume plan for Jag—200K a year globally—was untenable even without the economic diversion of the 9-11 terrorist attacks. But it was a bookkeeping move that falsely created a Ford Europe turnaround by getting the unprofitable Halewood plant off FE’s books and on to PAG’s.

Ford isn’t expected to make profit until 2009. Only if they weren’t going to meet that target would they seriously consider selling Jag and LR at this point. And in another year or two, if they decided to sell them, they’d be selling a profit-making asset instead of a money-losing one in a distressed selling environment. In short, Ford doesn’t have to sell Jag and LR now, so they won’t.

Reader Comments

Brendan Moore

March 14, 2007 6:41 PM

I don't think Ford should sell Jaguar and and Land Rover, but that doesn't mean it won't happen.

When you do the long-term math, it's difficult to see how Ford cannot sell Jaguar. It is an albatross around their corporate neck when they need such a handicap like that the very least.

Ford is in very, very serious trouble (see "Is Ford Going to Make It" - 2006 archives, Even worse than the current awful numbers suggest, since they really don't have anything in the future product pipeline that looks like it might save them, a la GM two years ago. At least GM had the products in the pipe then that are now lifting the company back up. Ford's product cupboards are pretty bare.

I don't see how Jaguar can stick around, and if Jaguar goes, Land Rover will have to go with it. Not only are they inextricably bound up from a manufacturing perspective, Land Rover will need to be packaged with Jaguar in order to induce offers from prospective buyers.

I''ll go one step further - I'm fairly certain even Volvo was on the bubble until recently. Now I don't think Volvo's going anywhere, but Ford was knocking the idea around until about 45 days ago.

Ford is in quite a jam.

B Moore -


March 21, 2007 11:19 AM

Here's the real story of why they won't sell:
1. They tried to move Jaguar downmarket with the X-type and failed miserably, hurting the brand in the UK.
2. Aston Martin was their upscale luxury brand, so they couldn't threaten that with better Jaguars, leaving Jaguar in a bad spot when the X-type backfired.
3. So they sell AM (since they can sell AM for more profitably) and move Jaguar upmarket, which will certainly happen with their new designs. Whereas AM lines up with Ferrari, they want Jaguar to line up with Maserati. And Jaguar is free to move upscale without internal bickering. Notice how similar the new Jaguar and AM coupes are.

I would have saved Jag by adopting the TVR product line, which seems to be a direct copy of Jag's classic cars, but whatever. They should do well with this tack, too, and I love their new concepts.

As for Land Rover, there's no reason to ditch them. They are a very good, viable global brand, with zero overlap with Lincoln and Jaguar products (and very little with Volvo). They have essentially moved LR into the same space as the Escalade in the US: big with the bling and execu-set (so you can stop with the Lincoln trucks, do you hear me, Mulally?). I think Ford is finally getting this figured out.

Of course Volvo is untouchable.

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