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Archive for Thursday, March 27, 2008

Ford unloads British autos

March 27, 2008

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— After spending billions of dollars on Jaguar and Land Rover, Ford Motor Co. gave up on the storied British automakers Wednesday and unloaded them to India's Tata Motors Ltd. for a mere third of the original purchase price.

Ford nets about $1.7 billion, a far cry from what it paid for the properties - $2.5 billion for Jaguar in 1989 and $2.7 billion for Land Rover in 2000. Counting losses and product development, analysts figure Ford spent more than $10 billion on the brands.

Those acquisitions, like General Motors' purchase of Saab and Chrysler's entanglement with Mitsubishi, came when cash was rolling in at the U.S. automakers as drivers snapped up cars and pricey pickup trucks and sport utility vehicles.

But Ford's fortunes have changed, with slumping U.S. sales and billions in losses. The fire-sale price comes as the Dearborn, Mich.-based automaker concentrates on its main brands.

"Now, it is time for Ford to concentrate on integrating the Ford brand globally, as we implement our plan to create a strong Ford Motor Co. that delivers profitable growth for all," said Ford Chief Executive Alan Mulally, who grew up in Lawrence and graduated from Kansas University.

"You have to cut your losses at some point," said Erich Merkle, vice president of auto industry forecasting for the consulting firm IRN Inc. in Grand Rapids. "It's been draining them of cash and resources."

Tata is India's oldest and largest conglomerate, with holdings in steel, information technology and autos. It should have the cash to save Jaguar and Land Rover and develop new products to better compete with luxury automakers, Merkle said.

The proceeds of the deal aren't enough to rescue Ford's finances, but the sale will allow the company to focus on restructuring its core brands, Merkle said. Ford does not break out financial results for its individual brands, but Merkle said Jaguar has never made a profit in the years Ford has owned it.

Ford, which lost $12.6 billion in 2006 and $2.7 billion last year, has been looking to sell the brands for months. It has mortgaged assets to keep operating and expects to burn up $12 billion to $14 billion until 2009, when it plans to become profitable again.

Ford shares fell 13 cents to $5.87 Wednesday. They have traded in a 52-week range of $4.95 to $9.70.

Comments

Marion Lynn 6 years ago

Do not be surprised if Ford Motor Company simply ceases to produce automobiles. The company may well revert to Ford family ownership through stock buyback and yes, the family is reputed to have enough money to do it. Although such a move would be a tragedy of proportions never seen in US history, it would not be unheard of. The Peerless Automobile company, decided at a board meeting one day in the 1930s to cease auto production. The company simply stopped building cars and began to buy every small brewery in sight, what with the repeal of prohibiton, Peerless did well for many years, producing kitchen equipment, food lines for the USA Army, Peerless Ale, Carling's Pale Ale and many others. The company has since been absorbed by one of the larger breweries,, much to the financial happiness of the original stockholders.

It is hard to imagine an America without Ford automobiles but the reality is that with the advent of cheap products from China and Asia in general, where production runs unhampered by punitive union contracts, US manufacturers are simply no longer competitive in terms of cost and cannot be.

Not even the Japanese manufacturers who build in the USA can do well; note the upcoming withdrawal of Isuzu from the USA market.

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