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In some ways, we have been remiss with our coverage of the potential restructuring of Ford Motor Company through the sale of Aston Martin, Jaguar, Land Rover and Volvo. Most of the reporting in the popular and business media has been tilting at windmills. Reporters reporting rumors without verifying facts. And the latest twitch that Ford is to soon announce it is selling Volvo may indeed be the same.
Jaguar, Land Rover and Volvo comprise Ford’s Premier Automotive Group and their American headquarters are just five exits south of AutoPacific on the 5-Freeway. Of course, Ford has already sold off Aston Martin for just shy of $1 billion. Is there more to follow? We don’t KNOW, but we have some ideas.
Is the Press Generating its Own News?
If you have followed the business news, the British press has piled on Ford selling Jaguar and Land Rover. Jim Hall’s June 27 story puts much of the rumor blame on Keith Crain’s Automotive News having overreacted to a short blurb in British car mag Autocar. Once AutoNews ran the story everyone else jumped on. Similarly, recent reports have Ford selling Volvo a much larger and more profitable proposition than selling off Jaguar and/or Land Rover. Would there be a likelihood that Ford could off-load all of PAG? Another don’t KNOW, but it would be difficult. More on that later.
Loans Collateralized by Jaguar/Land Rover/Volvo Assets At Risk?
The huge loans Ford took last year used its automotive assets as collateral. That included Jaguar, Land Rover and Volvo. Should Ford attempt to unload those assets, then the basics of the loan would have to be renegotiated. And Ford’s automotive assets without Jag/LR/Volvo or any of the three may not meet the coverage requirements. That’s another don’t KNOW, but a guess.
Unbundling Product Sharing Will be a Problem
Over the years, Ford Motor Company has attempted to make its product development activities more efficient by sharing products between Ford/Jaguar/Land Rover/Volvo/Mazda. In fact, Ford’s super successful European Focus/Mazda3/Volvo S40/V50 platform has resulted in excellent vehicles for each brand. Similarly, the Land Rover LR2 (Freelander II)/Volvo XC60 will be shared. Ford based the Jaguar S-Type off the LS Platform which also yielded the Lincoln LS, the Ford Thunderbird and, loosely, the Ford Mustang.
While these relationships may be maintained or even strengthened if Ford sells-off one or more of the PAG brands, it won’t be easy.
And if Ford gets rid of its PAG brands it will miss out on the revenue and profit potential of the critically acclaimed Jaguar XF sport sedan and the Volvo XC60 Crossover SUV.
We Believe ‘Em, Don’t We?
So, as of July 18, 2007, we believe it when Ford says it is looking at all options, but that the Company has not made a decision to sell Jaguar, Land Rover or Volvo. Think about it this way, Chrysler’s merger of equals with Daimler-Benz was not leaked before it happened. Great security. Similarly, Ford’s acquisition of Volvo came out of the blue. Maybe there is just too much smoke now for there to be any fire.