Sale offers Ford a fresh start

Ford Motor Co removed a major distraction from its massive restructuring plan with the sale of luxury brands Jaguar and Land Rover to India's Tata Group, analysts said.

While the losing bet on the UK nameplates has cost Ford billions, the sputtering US auto giant is better off getting rid of a "money pit" that would continue to drag on its operations, said John Wolkonowicz, analyst at Global Insight.

"They had almost 20 years of playing with Jaguar without success," Wolkonowicz added.

"Ford realized they don't want to put good money after bad anymore and it is in a position where they need the money to shore up their core business."

Ford has lost $15.3 billion over the past two years and responded by shuttering plants and slashing its workforce in North American by more than 40,000 workers.

But while it has been successful in cutting costs and gaining historic concessions from its main union, Ford has been unable to stem a steady loss of its US market share to Asian competitors.

While Ford is doing well overseas, it lost the number two spot in its home market to Toyota Motor Corp last year and sales this year have been hard hit by the weakening US economy.

"They're bringing out new models and cutting costs and they may well be back in the profit column in 2009 but a lot of it depends on the state of the industry," said David Healy, an analyst with Burnham Securities.

While Ford has enough cash on hand to weather the current economic downturn it's going to be a difficult time, and big changes are still needed to get the company back on track, Healy said.

"They're going to have to shrink some more and bring out distinctive new models that people line up to buy."

Healy estimates that Ford has lost anywhere from $5 billion to $10 billion dollars on its investment in the British luxury brands.

Ford is getting less than half what it paid for the two marques after buying Jaguar in 1989 for $2.5 billion and Land Rover in 2000 for $2.7 billion.

It has also pumped untold millions to turn around the brands, cover operating losses and develop new products. Ford also agreed to contribute up to 600 million dollars to the Jaguar and Land Rover pension plans as part of the 2.3 billion dollar sale.

AFP

(China Daily 03/28/2008 page17)