Ford's Fire Sale - Everything Must Go - $139B In the Hole

Discussion in 'OT Driven' started by TriShield, Jun 18, 2007.

  1. TriShield

    TriShield Super Moderator® Super Moderator

    Joined:
    Jul 6, 2001
    Messages:
    132,812
    Likes Received:
    1,707
    Location:
    PRESIDENTIAL TOWER, GREAT AGAIN, NY
    [​IMG]

    By Samir Syed
    June 17, 2007

    Desperate times, desperate measures. Ford Motor Company has retained the services of three investment banks to advise it on the sale of Jaguar, Land Rover and, perhaps, Volvo. Flogging the remains of the Premium Automotive Group (post-Aston) will plug a giant hole in the automaker's balance sheet, give FoMoCo a cash injection to sustain short-term operations and fuel its do-or-die turnaround plan. As Oliver Hardy would say, well, here's another nice mess you've gotten me into.

    The Premier Automotive Group (PAG) was the brainchild of Ford's then-CEO Jacques Nasser. Goaded by former BMW superstar Wolfgang Rietzle, the terrible twosome aimed to take Ford where Lincoln [supposedly] couldn't go: the top tier of the world luxury car market. With PAG, Ford sought to escape the mass market pressure at home and begin turning profits on margins, rather than volume.

    Nasser's plan wasn't beyond realization, but its implementation was deeply flawed. Arguably (and certainly in retrospect), Ford overpaid for tired assets. In '89, Jaguar cost Ford $2.5b. In '94, Aston cost… "nothing much." In '99, Ford paid $6.45b for Volvo. And in '00, Land Rover sucked $3.3b from Ford's corporate coffers.

    Ford poured unspecified billions into its PAG properties to improve product quality. It also spent tens of millions on Rietzle's pet projects, such as a Berkley Square, London design center and a doomed, prototype PAG "super dealership." A combination of executive profligacy, beancounting and bureaucracy rendered Ford's early investments woefully inefficient and largely ineffective.

    In the last five years or so, Land Rover, Volvo and Aston all managed to claw their way to profitability. (Ford dumped Aston this year for $957m.) Meanwhile, Jaguar kept trying to build luxobarges on the cheap, aiming to create massive profits through hiked prices and radically reduced development costs. The result was– is an unmitigated disaster.

    Jaguar lost Ford money from the git-go, and went downhill from there. In '06, Jaguar lost FoMoCo $715m, easily absorbing the profits generated by Volvo and Land Rover and plunging PAG into a $328m sea of red ink. A leaked internal memo indicates Jaguar will lose $550m in ‘07 and $300m in ‘08. Or more.

    In the past, car firms were bought and owned by other car firms or industrial conglomerates whose core business had synergies with the car business. Chrysler's macabre financial results would have been a giant red flag to possible investors. Today, the game has changed.

    When Dieter Zetsche put Chrysler in the discount bin, many openly wondered if there would be any takers. Having posted a $1.5b loss in fiscal ‘06, competing in the world's most competitive market against non-union shops, the company wasn't exactly a future growth superstar.

    That said, Chrysler has been profitable as recently as ‘03. Truth be told, a $1.5b loss for Chrysler represented 2.1 percent of its gross revenue. It may look abysmal in absolute terms, especially for a shareholder, but at the macro business level, Chrysler's loss was small. No car firms stepped up, but private equity did.

    Conversely, Jaguar's loss alone accounts for 8.4 percent of PAG's 2006 gross revenue– and that's including PAG's profits from Volvo and Aston Martin (before it was sold). Though it's an admittedly crude calculation, the figure illustrates the extent of Jaguar's plight.

    With these kinds of numbers, no car firm is likely to buy Jaguar. So, in come Cerberus and Blackstone again, to announce their interest.

    It's easy to see the potential "synergy:" Jaguar atop Chrysler as a luxury brand, Land Rover atop Jeep as a luxury SUV. Private equity, though, isn't interested in running a car business. It's interested in return on investment. Any offer for Jag and Landie will consist of pennies on the dollar.

    According to Automotive News, Cerberus' latest "come to the table" offer for Jaguar and Land Rover is around 5.5b Euros ($7.3b). That's a pittance for a company like Ford, which currently carries $139.4b in debt. The cash would barely allow Ford to service their debt for a year, let alone pay it down.

    Bidders may insist that Ford bundle po-faced Jag and Landie with higher-flying Volvo. While separating Volvo's platforms from Ford's products would be problematic, it's not an insurmountable challenge. And the final disposition of Ford's upmarket divisions could pave the way for a resurgence at Ford's original "premium" brand: Lincoln- if they have enough cash to fund it.

    Even if Volvo escapes this round of selling, when the next financial period ends and The Blue Oval needs to feed its ongoing cash conflagration to make it through the next quarter, it's going to be awfully tempting to unload the quirky Swede. Will that be enough? To quote Oliver Hardy in Sons of the Desert, "That's all there is. There isn't anymore. Is there Stanley?" No, Ollie, there isn't.

    http://www.thetruthaboutcars.com/?p=3956

    ------

    How much mileage is left in Land Rover, Jaguar and Volvo?

    [​IMG]

    By Robert Farago
    June 18, 2007

    Now that Ford has put the remainder of its Premier Automotive Group (PAG) on eBay, it's time to evaluate the soon-to-jettisoned divisions' prospects.

    As "going concerns," Land Rover and Jaguar are like a cartoon character who just ran off a cliff; the only thing that keeps them from plunging into oblivion is [momentary] ignorance that they're about to plunge into oblivion. Business wise, Volvo is the Daffy Duck of the group: a major star that somehow graduated to the role of successful sidekick. As brands, well, that's a different matter. Or, as it turns out, not.

    From a branding perspective, Land Rover is an unmitigated disaster. No surprise there; the brands' products have earned their manufacturer a worldwide reputation for bad engineering and poor reliability. A brand can only get so far playing the snob card. An off-roader that's destined to leave you stranded in the middle of nowhere (or Neiman Marcus) is a less coherent brand proposition than a $250 McDonald's Happy Meal.

    Sad but true: Land Rover's imperious off-roaders are only marginally more reliable than a love-struck teenager. In 2005, Land Rover was third to last in JD Powers' Initial Quality Survey. In the following year, Land Rover fell to last place– and then stayed there for '07. Engine power problems, exploding gearboxes, inaccurate fuel gauges, electronic gremlins– Landies live at the bottom of every automotive reliability survey conducted in the last six years.

    The implications are clear. Given the depth and severity of these self-inflicted wounds, Land Rover's resurrection would require at least a decade of flawless [re]engineering and manufacture, and an epic warranty.

    Why bother? SUV's are a dead genre guzzling. Land Rover's barely double digit mpg mules are both dead AND damned. And the competition's kicking Land Rover's arse in mud plugging (Jeep, FJ), price and reliability (from Hyundai to Toyota), fuel efficiency (you name it), and on-road performance (Porsche, BMW, Infiniti). There is nowhere for this go-anywhere brand to go– save the dumpster.

    Jaguar. As The Bonzo Dog Doh-Dah Band would say, dear dear dear oh dear dear dear oh dear dear oh dear no. While Ford gets maximum props for banishing the mechanical gremlins bedeviling the company since it was the Swallow Sidecar Company, Dearborn's darlings have all-but-destroyed the British automaker's mission critical cachet.

    It's bizarre. Sir William Lyons left clear instructions for his brand: pace and grace. Under Ford's stewardship, Jaguar has fashioned a lineup of vehicles that can only watch their German equivalents disappear into the horizon, whose sheetmetal displays less grace than a meth-crazed mosh pit dancer. A Ford Taurus nose on an XK? Puh-lease.

    Much has been made of Jag's ruinous move down-market. But the success of BMW's, Audi's and Mercedes' entry level machines proves that Jag screwed-up in X-ecution, not concept. The X-Type was an under-engineered mini-me version of the XJ sedan, which was an aluminum-skinned clone of the previous XJ, which was an "homage" to the XJ that preceded the model it replaced. You can't make this shit up.

    Ostensibly, Jaguar could return to Sir Billy's formula. Unfortunately, Jag's non-Teutonic competitors have filled the pace and grace mindspace. Maserati and a resurgent Alpha have nailed it. More importantly, Lexus' L-Finesse style has given their products something very much resembling sex appeal. Equally disheartening, Jag's last shot, the new XF, only gets it half right; it's pace without grace. Nope, Jag's day is done.

    And so to Volvo, the sensible Swede that sells safety. Despite Ford-sponsored attempts to add speed (racing station wagons?) and sex appeal (convertibles?) to the brand, Volvo remains a fundamentally boring proposition: the automotive equivalent of nurse's shoes. Well, there are a lot of nurses out there all looking for the world's most comfortable shoe, and plenty of people who'll buy a safe boring car over a less safe boring car.

    The automaker's safety shtick has such a powerful hold on the public imagination that the automaker could arrive unfashionably late to America's jam-packed SUV party tendering a woefully underpowered model- and STILL clean house. Seventeen years after Chrysler launched the Town and Country, a properly constructed Volvo minivan would perform the same feat.

    As Volvo customers don't expect frequent model updates, a new owner could take their time to improve the marque's models' reliability. And there's no reason why Volvo couldn't or shouldn't move down market, to become a full-line manufacturer of dull, safety-oriented automobiles. Anyway, the fact that Volvo is the only member of PAG banking bucks tells you all we need to know about the brand's strength.

    In sum, it's no wonder buyers eyeing-up Jaguar and Land Rover are [allegedly] insisting on some sort of Volvo bundling deal; Volvo is the only PAG brand with any life left in it. In fact, there's so much life left in the brand Ford should consider keeping it and selling off Mercury (as if) or Lincoln instead.

    [​IMG]

    http://www.thetruthaboutcars.com/?p=3969
     
  2. TriShield

    TriShield Super Moderator® Super Moderator

    Joined:
    Jul 6, 2001
    Messages:
    132,812
    Likes Received:
    1,707
    Location:
    PRESIDENTIAL TOWER, GREAT AGAIN, NY
    The author's suggestion about selling or discontinuing Lincoln and Mercury is spot on. Ford should have done that years ago and better allocated those resources to nurturing better brands or making the Ford brand better.
     
  3. dead on

    And I agree
     
  4. easeupoffmynuts

    easeupoffmynuts MVP OF SUCK

    Joined:
    Nov 9, 2004
    Messages:
    56,066
    Likes Received:
    0
    Location:
    PA CREW UNITE
    well no crap but then there would be no wankstas with ds on their trucks
     
  5. calteg

    calteg Those who would sacrifice personal liberty for sec OT Supporter

    Joined:
    Apr 28, 2002
    Messages:
    6,672
    Likes Received:
    26
    Location:
    Don't take things so seriously...life will kill yo
    ultimately they'll still have to have it out with the unions
    until that day comes they're delaying the inevitable
     
  6. pmoney

    pmoney OT Supporter

    Joined:
    Jan 8, 2004
    Messages:
    75,291
    Likes Received:
    68
    Location:
    Bethesda, MD
    They are in deep shit, but are finally producing quality products.

    Fusion, Edge, etc
     
  7. Section8

    Section8 .

    Joined:
    May 29, 2001
    Messages:
    99,761
    Likes Received:
    0
    Location:
    Golden, CO
    :rofl:

    The X-Type was an under-engineered mini-me version of the XJ sedan, which was an aluminum-skinned clone of the previous XJ, which was an "homage" to the XJ that preceded the model it replaced. You can't make this shit up.
     
  8. 93ex

    93ex New Member

    Joined:
    Apr 7, 2001
    Messages:
    21,194
    Likes Received:
    0
    Location:
    Tampa, FL
    The X-Type was an under-engineered mini-me version of the XJ sedan, which was an aluminum-skinned clone of the previous XJ, which was an "homage" to the XJ that preceded the model it replaced. You can't make this shit up.

    :rofl:

    As much as I like the some of the new Jags, why would I purchse an Xk when I could buy a bmw 6 series coupe with more power for less money?
     
  9. Tvan

    Tvan New Member

    Joined:
    Jun 21, 2006
    Messages:
    9,012
    Likes Received:
    0
    Location:
    Chicago
    :werd::werd::werd::werd::werd::werd:
     
  10. dpixel8

    dpixel8 New Member

    Joined:
    Feb 8, 2001
    Messages:
    48,450
    Likes Received:
    0
    Location:
    WI Go Bucky!!!!!!!
    you act like this is news :rofl:
     
  11. MCohen

    MCohen #NotMyPresident #AmericaIsAlreadyGreat #GoSolar OT Supporter

    Joined:
    May 30, 2004
    Messages:
    40,483
    Likes Received:
    535
    Location:
    Washington, DC
    Ford doesn't own Buick, GM does.
     
  12. Jake!

    Jake! Guest

    fusion, yes

    edge... not so much
     
  13. WhiskeyTangoFoxtrot

    WhiskeyTangoFoxtrot New Member

    Joined:
    Jun 2, 2003
    Messages:
    19,991
    Likes Received:
    0
    Location:
    Seattle, WA
    Yikes that was a heck of an article.

    If they terminate Lincoln/Mecury they are going to have a lot of pissed off/out of work car lots.

    Horrible management.
     
  14. GregFarz78

    GregFarz78 New Member

    Joined:
    Oct 28, 2002
    Messages:
    64,128
    Likes Received:
    0
    Location:
    Philly, PA
    keep volvo dump everything else
     
  15. 3030

    3030 3030 OT Supporter

    Joined:
    May 5, 2006
    Messages:
    54,918
    Likes Received:
    0
    Just bought a 2003 Jaguar XJ Super V8 ftw.
     
  16. D Hurr is like

    D Hurr is like He's got two left feet and he bites my moves.

    Joined:
    Jan 1, 2006
    Messages:
    23,740
    Likes Received:
    0
    Location:
    Houston
  17. jmx2323

    jmx2323 OT Supporter

    Joined:
    Oct 13, 2002
    Messages:
    53,459
    Likes Received:
    14
    Location:
    Centennial, CO
    they already sold off Hertz last year for a few billion
     
  18. RaginBajin

    RaginBajin Have you punched a donkey today?

    Joined:
    Dec 24, 2001
    Messages:
    8,740
    Likes Received:
    0
    Location:
    NoVA
    Maybe they should try to make a car that lasts more than a few years without rattling or squeaking uncontrollably and then sell them for a reasonable price.
     
  19. SQLee

    SQLee The OTer That Cares™

    Joined:
    Jul 15, 2001
    Messages:
    25,907
    Likes Received:
    0
    Location:
    Houston, TX
    I always wondered what the point of Mercury was. Lincoln could compete with the rest of the luxury market if Ford actually took dead aim at BMW, instead of thinking about making the cheapest car they can get away with. Maybe with Mercury they could make it the sporty brand? Who knows. The "big three" have big problems.
     
  20. CJPA

    CJPA New Member

    Joined:
    Jan 14, 2002
    Messages:
    114,304
    Likes Received:
    0
    Location:
    AZ, USA
    Motherfucking WORD.

    Also maybe they will produce a Jaguar that actually has performance that lives up to its pricetag. Or not--I don't really care, only pricks drive Jags :down: :rofl:
     
  21. Girth

    Girth ¯\_(ツ)_/¯ OT Supporter

    Joined:
    Jun 28, 2002
    Messages:
    71,420
    Likes Received:
    109
    Location:
    Houston
    well... say goodbye to the best selling truck in the next 10 years. :hsugh:
     
  22. blkhonda1991

    blkhonda1991 "Zoinks!!"

    Joined:
    Apr 6, 2001
    Messages:
    21,609
    Likes Received:
    15
    Location:
    Hartford, CT/Marlton, NJ
    their cars have looked identical for the last 20 years aside from the xk8 :dunno:
     
  23. Kokomo

    Kokomo OT Supporter

    Joined:
    Mar 18, 2005
    Messages:
    39,401
    Likes Received:
    36
    :wtf: buick is :GM:
     
  24. BoogieKnight

    BoogieKnight Active Member

    Joined:
    Aug 29, 2002
    Messages:
    24,196
    Likes Received:
    2
    Location:
    Wacko, Tejas
    So on the money with this. Lincoln and Mercury needed to go. Honestly, I can count on one hand the number of people I've known to have owned a Lincoln or Mercury car. The owners were all in their 50's or 60's.

    What I still don't get is that Ford makes quality products in Europe and Australia, but can't seem to translate the same manufacturing and product design successes over here in the states, yet foreign auto makers like Toyota and Honda are able to make quality vehicles here in the US that people are willing to purchase and make money off it? :dunno:

    (Ibblaming the UAW)
     
  25. blkhonda1991

    blkhonda1991 "Zoinks!!"

    Joined:
    Apr 6, 2001
    Messages:
    21,609
    Likes Received:
    15
    Location:
    Hartford, CT/Marlton, NJ
    there isnt a ford product id consider buying, but GM is coming out with quite a few that id consider like the G8, sky, solstice, the had the GTO, and the redesigned impalas arent bad
     

Share This Page