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Ford puts Aston on the market

As Ford executives ponder options over Jaguar, chairman Bill Ford has announced that Premier Automotive Group stablemate Aston Martin will definitely be sold.

It’s a U-turn, but is it a surprise? Not according to those who know the business. Aston Martin has struggled to make money. Its past is littered with cash injections, receivership and changes of ownership. Ford took control in 1994 and management at other Ford brands have questioned why Aston Martin gets so much money from head office when their R&D budgets have been cut.

The reason is the fact that it’s an evocative marque that, over the years, has consistently turned hard nosed businessmen into romantics.

Ironically, as Bill Ford puts Aston Martin on the market, the business is finally moving into profit on the back of new product like DB9.

But Aston Martin sits outside the rest of the Ford business and, as such, is the easiest to sell. It uses Ford powertrain, but has its own engine machining and assembly facility in Cologne, and its own plant and head office in Gaydon, Warwickshire.

Interest has been registered from a number of parties, with Aston Martin’s chief executive Ulrich Bez favourite with a management buy-out. He is refusing to comment on the speculation. A sticking point could be Ford’s £1bn valuation, a few hundred million pounds too steep, according to some automotive analysts.

#AM_ART_SPLIT# Options for Jaguar

Where does this leave Jaguar? Selling Aston Martin will leverage some capital, but even at the full £1bn, it is not enough to offset Jaguar’s losses this year – reportedly at £760m in the first half.

Troubleshooter Kenneth Leet, brought in by Bill Ford last month, will be only too aware of this.

He’ll also be aware that Ford has launched a series of turnaround initiatives over the past few years, none of which has been sufficiently far-reaching to haul the company out of the red. Leet won’t want to make the same mistake.

But he faces a conundrum. Ford can’t afford to keep a loss-making Jaguar, acquired for £1.6bn in 1989, but it can’t afford to get rid of it either. No-one wants to pay for a brand that has stubbornly refused to turn a profit – at least not without incentives.

Leet has three options: suggest a loan incentive, throw into the deal the profitable Land Rover operation, or go for a joint venture.

Jaguar has attracted interest, most publicly from construction firm JCB, which headhunted former Land Rover chief executive Matthew Taylor earlier this year. JCB chairman Sir Anthony Bamford told the press that “I’d like to buy it”, although he doesn’t want Land Rover.

Ex-Ford boss interested

Other possibilities include Jacques Nasser, the former Ford chief executive officer, who has secured funding from a venture capitalist for Jaguar and Land Rover; Korean carmaker Hyundai; and a Russian group thought to be GAZ, which now employs Martin Leach after its acquisition of LDV (see panel). That’s three former Ford executives in the mix.

Hyundai claims Ford has approached it – the company has long been considering a Lexus or Infiniti premium equivalent in Europe and America – but says it is not interested.

However, if Jaguar is available, going through due diligence would allow Hyundai’s financial analysts to suck out information ready to cherry pick for the launch of its own premium operation.

One former Ford senior executive believes selling Aston Martin makes more sense than Jaguar. “It is now a brand that can survive on its own. Jaguar and Land Rover are just too deeply woven into the Ford fabric for their sale to be easy.”

Jaguar’s problem is that having trebled production to 150,000 units within four years, its growth is “a huge overhead” which must be cut. “The company would be profitable at about 100,000 units,” says the source.

#AM_ART_SPLIT# Ford bungles PR

Irrespective of the outcome for Aston Martin, Jaguar and Land Rover, Ford has bungled its PR, both internal and external. Its senior executives are unremittingly bullish but, says one source, heads have dropped over the fact that Ford is selling brands it said were valuable assets.

And rumours have reached AM that managers at PAG brands are looking for jobs.

Leach ‘watching closely’

Martin Leach, former president and CEO of Ford of Europe and now chairman of LDV, says he is watching the strategic review closely and may consider a bid for Aston Martin.

“I know the business well, and I was responsible for putting the current chief executive and engineering director into Aston Martin. It’s a great brand and a reasonable business,” he says. “If the price is right I could be interested.”

Leach doesn’t rule out interest in Jaguar either, and admits he has a turnaround plan in mind, although he won’t divulge it because “that’s where the money lies”. He believes Ford will have to provide a substantial incentive for anyone to want a business with negative earnings and negative asset value.

“It’s going to gobble up cash for the foreseeable future. The current model range needs deep investment for new models and the business needs substantial downsizing.”



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