Posted by: David Kiley on August 1, 2007
The suitors are cued up kicking the tires on Jaguar and Land Rover, which Ford is trying to sell. The most intriguing candidates mentioned by insiders are India’s leading carmaker Tata, as well as Mahindra & Mahindra and Chinese carmaker Shanghai Auto.
Interest by private equity firms seems to be cooling for two reasons: the crunch in the debt markets, and a poison pill being dispensed by Ford out of necessity that stipulates that the buyer must hold onto U.K. manufacturing facilities for at least five years, thus protecting some 19,000 jobs. Ouch. Private equity, I’m told, may not to want to sign on to that deal.
The jobs. Ah yes, the jobs. Ford has been bedeviled for years by British labor when it comes to making a profit from either Jaguar or Land Rover. Despite the fact that there is no British auto industry left, the government is awfully bossy and keen to hamstring automakers, especially Ford, into holding on to more workers than they need. Ford in particular has been a patsy in this regard. Why? Ford has caved in on jobs and manufacturing capacity on Jag and Land Rover because it didn’t want to rile up the British public, government or incite a strike at its Ford plants. Ford is the biggest automaker in the U.K. by sales.
If Ford cut and run, which the government doesn’t seem willing to tolerate, it might still incite a public backlash against the Ford Blue Oval.
Any manager who has been to business school knows that in order to make a sustainable profit on Jag and Land Rover, you have to get the manufacturing the heck out of Britain where the pound is still a nightmare against the dollar and Brit labor has that rare combination of performing badly at the factory yet demanding top dollar and shortened work weeks. Perhaps they learned it from German labor.
Ford has made some colossal mistakes with its British luxury strategy. It planned too many sales for Jag. It developed the X-Type. It designed the S-Type for people who keep bowler hats in their closet hoping they come back in style.
But it would be delicious irony if Tata or Mahindra walked away with the Brit crown jewels of Jag and Land Rover. What would Gandhi think? What would Churchill think? If Tata was smart, it would lock the doors of Halewood and Solihull, the two main plants building the vehicles, five years and one day after it bought the two brands. Make the vehicles in India or Eastern Europe, and get the heck out of the land of the British Pound Sterling and the 35-hour work week. If BMW can make SUVs and sports cars in Spartanburg, SC then Tata can make Jags in Bangalore…and profit at the same time.
I also think Tata should develop a future Jag model called the Bodacious. What journalist doesn’t want to write a headline about The Bodacious by Tata.