India-basedMotors Ltd.'s deal to acquire Jaguar Cars and Land Rover from Motor Co. apparently has hit some snags, as Ford’s top European executive says the sale now is expected to be finalized by the end of the second quarter.
Since announcing the two British luxury marques were on the block last June,executives have said a deal would be announced in the first quarter, perhaps during this week’s Geneva auto show.
“Significant progess (has been) made in the discussions withon the sale," Lewis Booth, executive vice president-Ford of Europe and the Premier Automotive Group, tells investors and journalists via phone during the Merrill Lynch Global Automotive Conference in Geneva.
“There are no major roadblocks, but there is still some work to do," he says, declining to reveal specific details of the negotiations.
Booth does say long-term agreements are being forged to source components to
whomever buys Land Rover and Jaguar, and he emphasizes the importance of selling the two premium marques to a buyer that will continue to support and grow the brands.
“The European market is important, and we couldn’t be seen leaving Jaguar and Land Rover high and dry. We have Ford facilities in the U.K., and if we had done a poor deal with Jaguar and Land Rover, I think the U.K. workforce would have a poor view of that," he says, noting Ford of Europe, Jaguar and Land Rover facilities are represented by the same unions in the region.
As to why Volvo Cars isn't being sold instead of Jaguar and Land Rover, Booth says that largely is due to the fact the Swedish marque shares more components and platforms.
“I’m pretty comfortable that we’re doing the right thing,” he says. “The worst thing we could’ve done was starve (Jaguar and Land Rover) of investment because of the travails of our mainstream business. All the work we’ve done to get Jaguar and Land Rover where they are today would’ve been for nothing.”
Once the sale is complete, PAG will be dissolved, Booth says, leaving only Ford and Volvo.
Meanwhile, both Ford of Europe and PAG were profitable last year, with Ford of Europe posting a $1.5 billion pre-tax profit, a $1.4 billion improvement over like-2006's $111 million profit.
Booth credits much of the dramatic gain to costs reductions and successful new vehicles.
Ford of Europe recorded an automotive profit of $997 million in 2007, up $542 million vs. prior-year.
“You have no idea how hard we tried to find that last $3 million,” Booth quips.
PAG earned pre-tax profits of $504 million in 2007, up $848 million from the $344 million loss in 2006.
Booth says both Land Rover and Volvo experienced “significant volume growth” last year. A priority going forward is to make Volvo more of a stand-alone business.
Although the Swedish marque set a sales record last year, it was not profitable due to the declining dollar.
Ford is investigating whether to build Volvos in the U.S. to circumvent currency issues, but no decision has been made.