Ford unit likely to go: Jaguar

Sales of luxury car are down 30% through July

parent firm more than doubles 2Q loss

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August 03, 2006|By JIM MATEJA AND RICK POPELY | JIM MATEJA AND RICK POPELY,CHICAGO TRIBUNE

CHICAGO -- When Ford acquired it for $2.6 billion in 1989, Jaguar was its crown jewel. Now it's the division most likely to carry a "For Sale" sign as the ailing No. 2 U.S. automaker determines which of its business units to shed.

In reporting a $123 million global loss and a $797 million loss in North America in the second quarter, chief executive William Clay Ford Jr. said last week that he was going to accelerate the automaker's restructuring plan.

Yesterday, adding even more urgency, Ford more than doubled its second-quarter loss to $254 million in a filing with the Securities and Exchange Commission. The change reflected an increase in pension curtailment losses and other unnamed expenses.

Toward that end, Ford said it hired Kenneth H. M. Leet, an 18-year Goldman Sachs veteran who led investment banking activities for the automaker and other companies, as a strategic adviser. Leet will report directly to Ford.

Leet's first task will be to review what stays and what goes, assess alliances with other automakers and determine what to do with Ford's financing arm, Ford Credit.

"Everything has to be on the table," including alliances and divestitures, said David E. Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich.

"This isn't the time to be sanding the surface. It's time for major reconstruction to be a different company," Cole said, adding that Ford's Volvo and Mazda divisions probably are safe because they provide Ford with common platforms.

However, Ford spokesman Tom Hoyt insisted that there are "no plans to divest anything now." Though with the quickened pace of the company's restructuring efforts, "all aspects of the business would be reviewed," he said.

Yesterday's moves gave Ford stock a 5.78 percent boost on the New York Stock Exchange, where it closed up 38 cents at $6.96.

A major announcement is expected next week, when Mark Fields, the Ford vice president who heads the Americas division, speaks at a management forum in Traverse City, Mich. Hoyt wouldn't elaborate yesterday.

Until then, there's speculation that Jaguar, a member of Ford's Premium Automotive Group, is the most likely to be chopped.

The Premium Automotive Group, which includes Aston Martin, Land Rover and Volvo and was formed by ousted CEO Jacques Nasser, lost $162 million in the second quarter.

At the beginning of the year, Ford said it expected the group to be profitable in 2006, then said it would move toward break even. But in its SEC filing yesterday the company said, "Based on the recent trend in sales, we now expect [the Premium Automotive Group] to be unprofitable for 2006." In 2005, the group lost $100 million.

Ford no longer gives earnings guidance but maintains that North America is expected to be profitable by 2008.

And though Ford doesn't break out results for individual brands, analysts say Volvo, Land Rover and Aston Martin make money while Jaguar doesn't.

Reputation-rich Jaguar is believed to have been losing money since 2001, when it embarked on a questionable strategy to boost sales by offering the X-Type, a quasi-luxury $33,000 sedan based on the Ford Mondeo, a midsize sedan sold in Europe as a family car.

The lack of pedigree hurt Jaguar's image more than it helped sales. Jaguar's U.S. sales peaked at 61,204 in 2002, but by 2005 had fallen to 30,424 units. This year, Jaguar sales are down 30 percent through July, the most of any Ford brand.

That raises the question of who would buy the division.

"Certainly not Toyota, since the products wouldn't fit in its lineup," said Burnham Securities analyst David Healy. "It would fit better with a European, perhaps BMW or DaimlerChrysler, to add a luxury car to their stables. Or Ford could auction it off."

Ford owns a controlling interest in Mazda, which has morphed from a sickly affiliate into a profitable contributor, providing engineering expertise. Mazda's fiscal 2005 earnings soared 46 percent, to $580 million, and the company projects results will improve 12 percent this year.

None of this rules out an alliance. But Cole recalled that Ford declined a chance to join General Motors, BMW and DaimlerChrysler in developing a new hybrid.

Ford also may take a cue from GM in putting an equity interest in its Ford Motor Credit financial services operation on the table, though Ford executives insist that's not in the cards.

Jim Mateja and Rick Popely write for the Chicago Tribune.

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