KEY POINTS:
Good riddance to Jaguar and Land Rover.
Ford Motors is auctioning the celebrated British brands to bidders that include private-equity firms and two Indian automakers. The goal is to raise cash, perhaps as much as US$3 billion ($4.25 billion). A bigger goal should be removal of all distractions that might impede the rescue of Ford's floundering core automotive operations.
A dearth of fancy cars and trucks is one facet of Ford's troubles. Its own luxury brand, Lincoln, had been faltering for years. Instead of addressing it, Ford unwisely decided in the 1990s to spend billions of dollars buying European swanky car brands. Acquiring Jaguar, Land Rover, Volvo and Aston Martin - since divested - was analogous to an out-of-shape runner trying to regain championship form by buying expensive shoes.
Alan Mulally, the former Boeing executive who took over as chief executive officer from Bill Ford jnr a year ago, instantly recognised Ford as an automaker that had lost its way and stood on the brink of ruin. Mulally has openly blamed the lack of co-ordination among Ford's far-flung divisions and subsidiaries for the company's failure to pursue a common strategy.
Thus, Ford engineers in the US, Asia and Europe, each operating in their own world, didn't design common vehicle platforms that could be sold in different markets at minimum cost, a routine practice at Honda Motors and Toyota Motors.
Though Mulally hasn't been quoted as such, Ford's engineering and design output too often were second-rate. That's why buying a prestigious luxury brand like Jaguar must have seemed like a godsend: the company could acquire what no one wanted to fix.
Ford then created Premier Automotive Group, yet one more costly bureaucracy for managing the prestige brands. A new group needs new headquarters, so Ford opened one in pricey Irvine, California. Toyota proved in the late 1980s that a carmaker doesn't have to buy a high-end brand or spend years to develop one. Toyota invented the name Lexus, which in a few years became synonymous with luxury in the US because the vehicles' quality and the service from dealers were top-notch. Lexus since has turned into a worldwide upscale brand.
Since Ford couldn't bring its own brands up to world standards, it's not surprising it couldn't do so at Jaguar. Chief among the troubles was the pedestrian X-Type sedan, meant to be a US$30,000 entry-level Jag. It was an embarrassment since it barely looked or drove like a vehicle selling at a premium price.
Bayerische Motoren Werke AG might have been able to increase Jaguar and Land Rover's appeal by injecting its engineering and design prowess. But BMW's talents already may be stretched with two British car brands, Mini and Rolls-Royce, both of which have undergone revivals.
Mulally said the sale of Jaguar and Land Rover could happen by the end of 2007 or early 2008. TPG Capital, Cerberus Capital Management, Ripplewood Holdings and One Equity are among the private-equity companies trying to grab them.
The most intriguing interest comes from India, where two automakers, Tata Motors or Mahindra & Mahindra, both based in Mumbai, may be preparing bids. The Financial Times reported that Mahindra & Mahindra prefers to buy Land Rover only, even though Ford intends to sell both makes as a package. Ratan Tata, head of Tata Group , said he was trying to extend the company's "global reach".
During a recent interview, Mulally, 62, said the credit crisis had not diminished the interest of potential buyers in the British car companies.
"We love the breadth of the buyers, we love the depth of the buyers," he said.
Notwithstanding Mulally's optimism, the ability to command a good price for Ford could be impaired by difficult credit conditions.
He has little management attention to waste on the sale.
Ford's US market share, a much more critical difficulty, slipped to 13.7 per cent in July from 15 per cent a year ago, the lower end of Mulally's target range.
Without Jaguar and Land Rover, he can better concentrate on his most-important mission. If Ford's principal brand, the Blue Oval, doesn't regain its strength, it won't be long before a private-equity fund or Indian automaker again comes knocking. And next time they could be after the whole package.
* Doron Levin is a Bloomberg News columnist. The opinions expressed are his own.
