Why Ford sold 'crown jewels'
26 March 2008
- Losses needed to be stemmed
- Too many brands overstretched Ford
- Ford's board decided to focus on core markets
Finally, the rumours are over, and Ford has sold Jaguar and Land Rover to new owners.
It's been a long-running saga, but what has prompted the US giant to offload two of the best-known car marques in the world?
Slowing the losses
Well, Ford says it has decided to focus on its key products and markets, especially in the USA, so that it can start making a profit again.
Ford bought Jaguar in 1989 for £1.2 billion, and Land Rover in 2000 for £1.4 billion, bringing them under the wing of its Premier Automotive Group (PAG), which also ran Aston and Volvo.
However, in 2006, Ford recorded losses of £6.5 billion. Although these losses were reduced to £1.3 billion in 2007, the company recognised that it needed major restructuring if it was ever to return to profitability.
PAG accounted for around £1 billion of losses in 2006, resulting in the sell-off of first Aston to a consortium headed by former Honda F1 team boss David Richards, and now Jaguar and Land Rover.
Only Volvo remains, although Ford has indicated that it will not sell it, preferring instead to push it upmarket in a bid to differentiate it further from other Ford products.
Why now?
Analysts have questioned why Ford is selling Jaguar and Land Rover now, because Jaguar is poised for recovery after years of losing money. Its comeback follows the positive reaction to the XF, while Land Rover has made a profit for the past three years.
Indeed, although Ford has never released details of individual brands' figures, Land Rover is believed to have contributed as much as £1.2bn in profit to the company in 2007 on the back of sales that were up by 18%.
However, Ford sources say that, no matter how profitable its luxury brand offshoots are, unless it focuses its resources on turning around its core business, it cannot hope to recover.
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