What Is Ford Worth as it explores selling assets/mergers?

[nadepalma]

Source: http://www.businessweek.com/autos/co...ndex+page_news

AUGUST 3, 2006
Top News
By David Kiley

What Is Ford Worth?
Ford is exploring selling assets or a merger, but how much could they get and who would want the pieces?

What's Ford really worth? Its shareholders and the family that controls the ailing automaker are about to find out. And it won't be pretty.

Its market capitalization stood at just over $13 billion at close of trading on Wednesday. In comparison, Toyota (TM ), which in July just passed Ford (F ) as the nation's second-biggest car seller behind General Motors (GM ), has a market capitalization of more than $170 billion. Looking to raise cash and stem its loss of market share, the company is thinking that the sum of its parts may be worth more than its whole.

READY TO GO. The company is signaling that it is prepared to act quickly. Ford confirmed Wednesday that it has hired former Goldman Sachs (GS ) mergers and acquisitions investment banker Kenneth Leet to advise Chairman and Chief Executive William C. Ford Jr. and the automaker's board about possible alliances with other automakers and sales of assets such as its Jaguar brand or part of Ford Motor Credit. That news, which drove the automaker's share price up almost 6% Wednesday, was muted in after-hours trading when the company disclosed that, because of pension losses, its second-quarter loss was $254 million, more than double the number previously announced. It also said its British brands plus Volvo would lose money on the year instead of post a small profit as forecasted because of worsening sales.

Ford is facing the reality that its market share and profit outlook is falling much faster than it can possibly bring new products to market. Despite the fact that it has the best-selling vehicle in the world in the F-Series pickup truck, July sales figures released August 1 show that the company saw a more than 44% decline from June in light truck and SUV sales.

In addition to its flagship Ford brand, the company's assets include Lincoln Mercury; its Premier Automotive Group, which includes Jaguar, Land Rover, Volvo, and Aston Martin; one-third of Japanese automaker Mazda; and Ford Motor Credit.

ASSESSING THE ASSETS. So what would Ford sell, and what could it expect to make? Considering that Ford paid $6.45 billion for Volvo in 1999 and the Swedish brand is in better shape now than it was then, it's likely that the value of the company is at least equal to what Ford paid. Volvo is difficult to value because the brand's products and operations today are so integrated with the rest of Ford. As of last week, its Mazda stake was worth about $3 billion. Those two brands together, then, account for about 75% of Ford's value today.

Ford acquired Jaguar in 1989 for $2.5 billion. Given that Jaguar loses about $2 million per year and has cost Ford more than $10 billion in investment and losses over the years, it is uncertain whether Ford could sell it for much more than its original purchase price.

Valuing Volvo, Jaguar, Land Rover, or Aston Martin, says Merrill Lynch (MER ) analyst John Murphy, is terribly difficult because of how intermingled the distribution and engineering have become among the British brands and between Volvo and Ford. However, if any of these companies are sold, Ford will need to determine a valuation.

Then consider that a half-stake in Ford Credit, says Murphy, would be worth about $6 billion. That's considerably less than the $14 billion GM is expected to net from selling half of GMAC. But Murphy points out that Ford Motor Credit is more of a pure auto-finance company with a little commercial real estate on the side, while GMAC is attractive because it has considerable mortgage financing and insurance business and a first-class loan serving operation. There would be fewer bidders in the room for Ford Motor Credit, says Murphy.

LIKELY BUYERS. Analysts and critics of Ford's multibrand strategy have long complained that it would probably be better to concentrate on Ford, Lincoln, and Volvo, rather than spreading its limited capital across so many brands. "Closing, selling, or JVing [joint-venturing] money-losing Jaguar would likely be difficult, but positive," says Goldman Sachs auto industry analyst Robert Barry. Ford would find few takers for its British brands despite a recent upturn in its Aston Martin brand and sales of the Range Rover Sport.

The most likely buyers to surface? American, European, and Japanese automakers would be unlikely to make a bid, even if assets like Jaguar were to be sold at fire-sale prices. Two possible scenarios involve a combination of private equity, probably British, or a Korean or even Chinese automaker.

Nanjing Automotive Group, for example, last year bought the remnants of MG Rover and announced it will build MG brand vehicles in China, Britain, and Oklahoma. The Chinese are more interested in old British vehicle brands than the rest of the world. Moreover, it would give a company like Shanghai Automotive a back door into the Western market by buying even a struggling but well-known brand like Jaguar. Private equity would likely surface to buy 51% of Ford Motor Credit, just as they did when GMAC went on the block.

NO SACRED COWS. What comes of Leets's work remains to be seen, but the work itself is significant. "We think the most significant near-term implication of any such news would be symbolic—that Ford the company, as well as CEO Bill Ford and the Ford family, is willing to take a more aggressive stance towards fixing the business, that there are no sacred cows,— says Goldman's Barry

Indeed, Leets's arrival signals that Bill Ford and his closest advisors do not have the time to wait four years for excess factories to close and new products to arrive to save the day. The company has not proved to be adept or consistent at managing its product launches and marketing. The three notable exceptions have been the Ford F-Series truck, the Ford Fusion, and the Mustang.

Outside of its British Premier Automotive Group, Ford's flow of new products is spread too thin and not coming fast enough. This fall, there's a new Ford Edge crossover arriving, and its mechanical cousin, the Lincoln MKX. Both are much needed, given the collapse of Ford's longtime breadwinners, the Explorer and the just redesigned Expedition SUV.

But the only new model of any note next year is a Ford Super Duty Truck. The 2009 model year, two solid years away, has the Ford Fairlane light SUV, the Lincoln MKS sedan, and a new F-150 pickup. Ford is now being cagey about when a series of small cars slotted below the entry-level Focus will arrive. Executives previously said 2008, but now it looks more like 2009 at the earliest.

FEWER BRANDS? All its woes are apparently leaving Ford management, the Ford board, and even the Ford family a bit squeamish. The door that's been closed to alliance partners who could end up with seats on the Ford board or sales of brands considered untouchable is now ajar. Jaguar, for example, has long been defended and protected by Bill Ford's father, William Clay Ford Sr., a board member who engineered his son's ascension to the chairman's job. But even he must be having his doubts about robbing Ford and Lincoln, not to mention Volvo, of resources to fund Jaguar's perennial revival plan.

If you buy into the idea that Ford needs to focus its resources on the brands and businesses that have the most reasonable expectation of upside, you are left with Ford, Lincoln, and Volvo. That means closing Mercury and selling off or jettisoning Jaguar, Aston Martin, and Land Rover. Can Ford get along with just three brands? So far, it's working pretty well for Toyota, which has just Lexus and Scion in addition to its own flagship. And Toyota just passed Ford and is crowding GM to be the world's biggest automaker.

Strategies change the worse off business looks for Ford. It was as recent at 2003 that Bill Ford said he had no interest in selling the company's Hertz rental car unit. "It's part of the Ford family," he said at the time. Hertz was sold off to private equity at the end of last year. There are families, and then there are families.

[jwrebholz]

*empties pockets* ..I got 5 bucks. What'll that get me?

[pkd87]

AS much as I like Jaguar and how much potential it has for ford. It sadens me how poorly Ford has treated that brand. I think Ford better sell it off and focus their on Lincoln because we all know how much trouble they are in and Lincoln has pontential to sell alot more cars than Jag does (at least State wise, not sure about Europe and other markets).

[nadepalma]

I can certainly understand the need to sell assets to help things along in the short term...but I don't know if selling some of these assets will help when their product pipeline is dry. True, getting some infusion of cash is helpful, but there certainly is a need to hold on to some of these brands just as they are on the cusp of revival or putting out new products. Jag for instance has the new XK and the upcoming S-Type. These are important. Land Rover and Volvo and Aston Martin are finally making money and the consolidation behind the scenes are paying off. Volvo is a gem. Selling off some or all of this might be a bit much though. I could see Ford taking on a partner though. Rumor was that PSA Puegot Citroen had approached GM to purchase Saab and approached Ford to buy Volvo or Jag. PSA WANTS a luxury brand. So maybe inviting PSA to take a stake in PAG might be a way to go? Who knows.

Just thinking out loud.

[Steel4ring]

Originally Posted by jwrebholz

*empties pockets* ..I got 5 bucks. What'll that get me?

How about Jaguar? Better yet, give me 5 bucks and I will spot you the other 5 and you can have Lincoln.

[mbukukanyau]

These guys who sit in ground Zero and pretend to know how to run auto companies.

Ford should hold on to what it has and simply build better cars

[nadepalma]

Originally Posted by mbukukanyau

Ford should hold on to what it has and simply build better cars

That's what I was trying to say in my earlier post. True, in the short term, selling off assets will help. But in the end, they need to develop products that folks want and desire. Jag is a very chich and sporty brand -- but they've bumbled it. Selling off a core asset like Jag might come back and bite them in the butt if the new proposed design philospohy really takes off. They put in so much investment, it doesn't make sense to get rid of them before they actually turn a profit.

[nadepalma]

More "news" and speculation from the British Press:

Source: http://business.scotsman.com/index.cfm?id=1141332006

Land Rover could be sweetener in Jaguar sale
MARTIN FLANAGAN

AMERICAN car giant Ford is believed to be set to throw in Land Rover as a sweetener in its attempts to sell its other iconic British car-maker, Jaguar.

Industry sources say this is because there are virtually no trade or industry buyers who would be prepared to take on lossmaking Jaguar on its own, whereas Land Rover, the maker of four-wheel drive vehicles, does make money.

Ford is understood to be moving towards a joint sale of the British subsidiaries after abortive exploratory talks about Jaguar in recent months with French carmakers Renault and Peugeot, and Hyundai, the fast-expanding South Korean company.

The latest move follows a strategic review of Ford announced last week by chief executive Bill Ford jnr alongside second-quarter losses at the American company of $254 million (£135m).

The loss was twice that forecast by Ford only weeks earlier. It is understood to have the final straw for executives who have seen Jaguar turn a profit in only a handful of years since Ford bought it for £1.6 billion in 1989 - a price now widely seen as a "steal" for then-Jaguar chief executive Sir John Egan.

The Jaguar brand was at that time was seen as one of the most valuable in the upmarket car world, but in the time it has been in Ford's ownership it has made total losses of £1.6bn.

Ford has repeatedly invested fresh capital in Jaguar, including £1.2bn just before last Christmas. Including the original purchase price, Ford has invested the thick end of £4bn in the company.

It is believed there is a growing consensus on the Ford board to cut its losses to offset rising competition in its core US market.

The favoured plan is believed to be for Ford to keep a minority stake in Jaguar and Land Rover after a sale, while also continuing its technical and supply links with the two groups.

It is one of the options being explored by Kenneth Leet, the former Goldman Sachs and Bank of America banker, who was appointed last week as special advisor to Ford jnr, great-grandson of Ford's founder.

Motor industry analysts said at the weekend that one alternative to a sale would be to cut back Jaguar production and focus on exclusive deluxe sports cars.

Last year, amid much political controversy, Ford closed Jaguar's plant at Brown's Lane in Coventry, with the loss of 1,000 jobs.

• It was also reported yesterday that Russia's sixth-richest man is considering whether to make a bid for Jaguar. Oleg Deripaska boasts an estimated £7.5 billion fortune and is eager to expand his GAZ motor empire.

He recently linked up with former-Ford Europe head Martin Leach in a bid to spark the international development of GAZ, Russia's biggest car-maker.

[macphisto]

But how necessary is the Mercury brand?

Most of them are overpriced, rebadged Fords. At least Buick is trying to differentiate itself. Mercury doesn't appear to do a very good job of it. It'd be one thing if it was a more performance oriented brand, but it's hardly that.

[jlt0x]

Ford has neglected all of its brands in the Premier Auto Grp. Aston Martin, Volvo, Jaguar, and Land Rover has suffered.

- Jag has been taking to worst beating b/c of a lack of progressive designs that screem "present & future" while whispering "heritage of the past". The S-Type has been fine, but it needs to be refined and updated. The X-type can be discontinued...the 3.0L Sport AWD model should be the base model (a higher output V6 having at least 275 hp should've been available). The XJ...well it's just the XJ.

- Land Rover has been doing OK, but they needed to have the redesigned Freelander/LR2 a couple years ago. And Land Rover possibly needs a 4th global entry to expand the brand.

- Aston Martin have been getting some good product lately, it just needs more marketing to let the mainstream know that they're still around. The new DBS for the Bond movie will help there. The Rapide luxury-sport sedan will be an eye-popping model that'll elevate the entire vehicle line for the brand.

- Volvo, while being a basically solid performer, the introduction of a new S80 w/a V8 and AWD model will be good. The new design shows forward progression from the "boxes with safety belts" with 4,5, and 6 cylinder engines. Sourcing the V8 from Yamaha was very smart.

[jbartley]

Ford had the perfect formula for success and they blew it bigtime!
They've never had to deal with all the brand differentation that GM has had to figure out.


and they deserve to sell jaguar at a loss, after blindly throwing billions of dollars at a company that couldn't make a decent product.

[SobeSVT]

Originally Posted by jlt0x

Ford has neglected all of its brands in the Premier Auto Grp. Aston Martin, Volvo, Jaguar, and Land Rover has suffered.

- Jag has been taking to worst beating b/c of a lack of progressive designs that screem "present & future" while whispering "heritage of the past". The S-Type has been fine, but it needs to be refined and updated. The X-type can be discontinued...the 3.0L Sport AWD model should be the base model (a higher output V6 having at least 275 hp should've been available). The XJ...well it's just the XJ.

- Land Rover has been doing OK, but they needed to have the redesigned Freelander/LR2 a couple years ago. And Land Rover possibly needs a 4th global entry to expand the brand.

- Aston Martin have been getting some good product lately, it just needs more marketing to let the mainstream know that they're still around. The new DBS for the Bond movie will help there. The Rapide luxury-sport sedan will be an eye-popping model that'll elevate the entire vehicle line for the brand.

- Volvo, while being a basically solid performer, the introduction of a new S80 w/a V8 and AWD model will be good. The new design shows forward progression from the "boxes with safety belts" with 4,5, and 6 cylinder engines. Sourcing the V8 from Yamaha was very smart.

So it seems that Ford hasn't neglected all of its global brands, including Mazda.

[TaHoE]

AMERICAN car giant Ford is believed to be set to throw in Land Rover as a sweetener in its attempts to sell its other iconic British car-maker, Jaguar.

Gorgeous. Really what a shame. I am a big fan of Jaguar and Land Rover. (Minus their poor reliability).

[macphisto]

Originally Posted by SobeSVT

So it seems that Ford hasn't neglected all of its global brands, including Mazda.

Mazda is not a Ford brand. Ford owns something like 20% in Mazda but Mazda is not run by Ford. It's more akin to the Isuzu-Subaru-Suzuki & GM things, at least that's what I think. For a while it was mainly Ford who gave truck and SUV assistance to Mazda but Mazda gave the platform for the Fusion.

[Bornfromparents]

selling all these brands would inject money but would it do to marketshare
they would need to have better cars and trucks ready to roll within a few
years or it will be a very hard battle for them with a weak product pipeline