Reading the newspaper, there are times when I wonder if certain companies are actually trying to fail. Recently, the Ford Motor Company (NYSE: F) announced plans to sell its Jaguar and Land Rover brands to Tata, an Indian car company. While Ford paid $5.2 billion for the two companies ($2.5 billion for Jaguar in 1989 and $2.7 billion for Land Rover in 2000), it has sold them for a combined $1.7 billion, less than a third of the purchase price.
I don't really have anything against Ford. I once owned a Mustang convertible, which was a lot of fun to drive. Better yet, it was not that hard to work on, which proved helpful given its tendency toward constant technical problems. However, Ford's corporate governance has never been all that hot. I'm sure that there's a perfectly reasonable explanation for the fact that Ford hasn't been able to make money off of either of these impressive brands, but I wonder why the company spent money picking up luxury marques when it was on somewhat shaky footing. Now that they've gotten rid of these two great companies, I hope that Ford will focus on the problems with its main car lines and the fact that they are gas-guzzling, poorly-designed, and prone to technical problems.
Of course, if that fails, they can always try buying Fiat and then reselling it to an Ethiopian manufacturer.
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Reader Comments (Page 1 of 1)
3-27-2008 @ 6:46PM
NewsVisual said...
As part of its restructuring effort in order to return the company to profitability, the Ford Motor Co announced on Wednesday that it will sell its Jaguar Land Rover operations to Tata Motors Ltd, a family-controlled auto company based in India. The total amount to be paid in cash by Tata Motors for Jaguar Land Rover upon closing will be approximately US $2.3 billion, Ford said in its statement. "Jaguar and Land Rover are terrific brands," said Ford CEO/President Alan Mulally. "We are confident that they are leaving our fold with the products, plan and team to continue to thrive under Tata’s stewardship.” Mr Mulally then sought to inform investors that the company has a strategic plan in place to ensure its future profits: “Now, it is time for Ford to concentrate on integrating the Ford brand globally, as we implement our plan to create a strong Ford Motor Company that delivers profitable growth for all." Whatever Ford’s future turns out to be, it’s clear that this was a crucial deal for the company, and the personal connections between the two companies could have been a critical component in facilitating its completion.
3-27-2008 @ 7:31PM
Bruce Watson said...
NewsVisual-
I'm impressed by your effort to put a bright face on this debacle. Keep in mind, though, that Ford also agreed to pay $600 million into employee pension funds, reducing their overall remuneration to $1.7 billion.
3-27-2008 @ 11:07PM
Hemant said...
Hey Bruce:
You are right.
Tata Motors is just like some unknown Ethiopian manufacturer.
Attitudes like that allow us to be surprised constantly.
I remember Toyota & Honda being considered as manufacturers that could only build toy like cars.
Hemant.
PS
My wife just purchased an Acura MDX for over $50K -- she chose this vehicle over a Caddy, a Lincoln MDX & a Mercedez.
3-28-2008 @ 3:15AM
Dhruv said...
Bruce,
why all this whining dude. Indians have been taking over all sorts of companies now. Arcelor, Corus, Whyte & Mackay, etc. After watching the pitiable sight of Guy Dolle eating his own words you should've known better.
PS
Tata is not a family business anymore. We do not live in the 19th century anymore. It is now mainly a Private Conglomerate.(Pullonji alone owns more shares than all Tatas put together).
3-28-2008 @ 6:53AM
Smoothie said...
FORD always had a better idea....They just weren't telling anybody! LOL!
3-28-2008 @ 7:01AM
al coholic said...
You said about Ford,
"I hope that Ford will focus on the problems with its main car lines and the fact that they are gas-guzzling, poorly-designed, and prone to technical problems."
Seems to me that's the reason they are dumping these two losers. Forget the past, I think it is a rational decision.
3-28-2008 @ 8:07AM
Bruce Watson said...
Hemant, Dhruv, and US Agent-
You're right; my attitudes are somewhat backward--frankly, I'm just blown away to see a former colonialized country taking over two of the signature brands of its former colonizer. That, by the way, was at the heart of my Fiat/Ethiopia comment, although I understand how the connection might seem a little obscure.
Also, it's interesting that you jumped right on the India/Ethiopia disconnect, but didn't see any injustice in my comparison of Jaguar and Fiat!
Regardless, the way things are going, I clearly need to adjust my attitudes. Given its raw ambition and ever-growing industrial might, India is bound to be an economic and industrial powerhouse in this century.
Smoothie-
If I had any Ford stock, I'd drop it, just in case they have any other great ideas!
Al Coholic-
You're absolutely right. I think my problem is with Ford's decision to pick them up in the first place. Here we have a troubled carmaker who decides to buy two extremely expensive brands, pays top dollar, and then hopes that they'll save its hide. I don't have a business degree, but even I can see that this was a disastrous move. Basically, from the Pinto fiasco onward, I'd have to argue that Ford's management has been spotty at best, and almost criminally bad at worst.
3-28-2008 @ 8:40AM
USAgent said...
I'm not entirely sure how you can compare the engineering talent reasonating out of India which arguably has some of the brightest talent worldwide with Ethiopia, a country with virtually no infrastructure?...If you can come up with a legitimate argument (just one because I really want to give you a chance here) as to how you made this conclusion I'll postpone my condemation of you as one of those people who thinks that he is better than someone else based solely upon his race....there's a word for it but I just can't quite remember it...
3-28-2008 @ 9:01AM
jcarr said...
ford is the best car out there! hands down. the 4.6 / 5.4 /6.8 romeo built motors run for a half a million miles...iv owned a repair shop for thirty years...nothing but ford products for me...ford forever
3-28-2008 @ 9:04AM
Bruce Watson said...
JCarr-
If it was all about engines, I'd completely agree with you. The trouble is, Ford also is responsible for all the stuff that surrounds the engine, including its cruddy lock mechanisms, problematic transmissions, questionable styling (with the notable exception of the current Mustang, which is awesome), and chintzy interiors.
The engines are great, though. Apart from the fact that they drink gas like it's going out of style.
3-28-2008 @ 9:59AM
MANNY D said...
watson your take on fmc products is out of tune with todays reality!!have you driven any of the 08 models, cars or trucks??all these vehicles measure up well against the competition.i drive an 08 lincoln mkz, which replaced my wifes 05 nissan altima 3.5l se model.the mkz is faster & better handling than that overrated japanese model!the car isn't a gas guzzler & i wouldn't trade it for any asian or overpriced euro model out there!!!$ for $ ford today offers a good product for the consumers $$$.!!! MANNY D
3-28-2008 @ 10:13AM
MANNY said...
WATSON THE NEW FMC PRODUCTS ARE MUCH BETTER THAN YOU ELUDED TO!!TODAY THEY MEASURE UP WELL AGAINST THE ASIAN PRODUCTS, WHICH IMO ARE OVERRARED!!THE TRUCKS ARE THE BEST FOR THE CONSUMERS $$, AND THE CARS HAVE MUCH IMPROVED. YOU, LIKE SO MANY ILL INFORMED GUYS , ARE OUTDATED IN YOUR ASSESSMENT OF FMC PRODUCTS.I DRIVE AN O8 LINCOLN MKZ, WHICH REPLACED MY WIFES 05 ALTIMA 3.5L SE MODEL.THE LINCOLN IS FASTER & BETTER HANDLING, GETS BETTER GAS MILEAGE & THE OVERALL FIT & FINISH IS EXCELLENT!!ON TOP OF THAT THE CAR IS NOT OVERPRICED???SO THERE YOU HAVE IT!! YOU'RE ENTITLED TO YOUR OPINION, BUT,FACT IS YOU'RE ALL WET!!! MANNY D
3-28-2008 @ 10:59AM
Bruce Watson said...
Manny-
First off, STOP YELLING AT ME! I CAN STILL UNDERSTAND YOU, EVEN IF YOU USE LOWER-CASE LETTERS!
Okay, now that I've gotten that off my chest, I will admit that you may have a point. Ford trucks are great (I always loved my father's F-150). Also, I haven't driven any of the 2008 cars (although my mother-in-law's 2007 Fraud Exploder is already giving her problems).
If you're correct (and I have no reason to doubt your take on this), then great for Ford. Apparently, they've managed to catch up to the foreign brands that they've been trailing for decades.
Although, I will also point out that Lincoln has always been Fords luxury marque, and the best of its cars. I'd be really surprised if "the fit and finish" weren't beautiful.
Still, can you explain to me why Ford, which was once an innovative leader in the automotive field, has been trailing behind the competition for so long? As the hydraulic F-150 demonstrates, Ford can (sometimes) rise to the occasion; why do they need Toyota to show them the way? When will we be able to take pride in a FMC that leads the pack instead of waiting to see which way it's headed?
3-28-2008 @ 11:00AM
Bruce Watson said...
Tony-
I couldn't agree with you more.
3-28-2008 @ 11:30AM
roudy11z said...
These are all interesting comments so far. I might add that the problem is and always has been with FMC upper management in my opinion. Isn't that basically at the bottom of every company's success or demise? There seems to be no consequences for bad decisions made by them like being FIRED!
3-28-2008 @ 12:49PM
Tony said...
Ford should have never bought Jaguar & Rover in the first place. They were declining companies with repair records much worse than Ford's. Ford did improve both of them but they are still dogs & sucking up too much Ford capital. Sometimes you have to sell at a loss to cut your losses for long term improvement of your company.