The Jaguar/Land Rover Sale: It’s Best Not To Add Up How Much Ford Wasted
April 01, 2008

By Richard Feast

So, Ford has finally stitched together the long-trailed sale of Jaguar and Land Rover to Tata. It is the inglorious end of the vainglorious Premier Automotive Group that was supposed to challenge the mighty Mercedes-Benz and BMW.

We can now see the venture was doomed nanoseconds after it was created.

Ford shareholders, suppliers and dealers, and those made redundant by this sorry empire-building episode, will be hoping the Ford decision-makers who were responsible for it are getting plenty of sleepless nights. Seldom in the auto industry has a group of executives wasted so much money for nothing.

We will never know how much in total, but the simple headline numbers indicate the scale of the debacle.

Tata agreed to pay Ford $2.3 billion for Jaguar and Land Rover — and then got Ford to commit a further $600 million toward pension provisions at its former U.K. companies.

Only eight years ago, Ford handed over approximately $2.5 billion to BMW just for Land Rover. And 11 years before that, it forked out $2.5 billion or so to shareholders of then privately owned Jaguar.

Little Aston Martin was part of the Premier plan as well. No sooner had Ford funded the most intensive investment program in Aston Martin history than it sold the company for an unknown sum last year to a private-equity firm.

During Ford’s ownership of the three marques, it invested in the modernization of Land Rover’s Solihull factory. It established a new assembly plant for Jaguar at Castle Bromwich and transferred another at Halewood to the company.

It built a showpiece headquarters and low-volume assembly plant for Aston Martin at Gaydon. Dedicated design and engineering facilities were established at Whitley and Gaydon.

Ford inherited an almost-ready Range Rover from BMW, but other product programs required enormous investments. Jaguar got an aluminum chassis, V8 engines and smaller models, for instance, and Aston Martin got V12s and a three-car range — four when the Rapide arrives next year.

Ford reported substantial financial losses at Premier for most of its existence because of Jaguar or Land Rover or both. It took a hit on those cumulative deficits.

How much are we up to — $6 billion, $7 billion, $8 billion? Ford paid for it all. Now Tata has bought the lot for a pittance.

Separately, but another indicator of the hubris and vacillation associated with those times, Ford’s three-year ownership of Kwik-Fit, a U.K. aftermarket chain, cost it $1 billion more. Ford bought at the top of the market, changed its mind and sold at the bottom.   

Popular sentiment in the U.K. is Ford should not have sold Jaguar, Land Rover and Aston Martin at this time — that each is on the verge of a turnaround after years of troubles.

Maybe, but Ford’s woeful stewardship equally indicates it should never have bought them in the first place. The money would more sensibly have been spent on some appropriate cars and trucks for North American buyers. It might even have helped to arrest the steady declines at Lincoln and Mercury.

It would certainly have helped Volvo to achieve the 600,000 annual sales Ford promised when it bought the Swedish automaker in 1999. (Oops — that’s another $6.5 billion!) Volvo is a global brand with enormous unrealized potential. All too often, though, its executives could only look in awe and envy as Ford cash poured into its U.K. firms.

But with Ford out of control in North America, the European trophies could no longer justify yet more money and management time. They had to go.

One hopes the new owners of Jaguar and Land Rover understand the dangers of overambitious takeovers. Ford was not alone in getting things wrong. So did BMW with Rover and Daimler with Chrysler.

History will only repeat itself in another decade or two if Tata does not learn from their mistakes.

Ford naturally wants to airbrush these recent exercises from its history. But it cannot recover its former glory until it abandons the cocksure management mindset that created the Premier screw-up. A little humility would be in order.

It would also be nice to think that those present and past Ford executives who were responsible for the mess are now returning a little of Ford’s largess by way of compensation. They took their handsome salaries, bonuses, perks and share options at the time and they failed to deliver. Now everyone else is paying for their mistakes.

Richard Feast is a London-based freelance automotive writer who has covered the auto industry in Europe and the U.S. He is author of Kidnap of the Flying Lady, an investigation into the sale of Rolls-Royce, and The DNA of Bentley, a history of the Bentley marque.

Photos by manufacturers
1 — Land Rover family
2 — 2009 Jaguar XJ
3 — Forthcoming Aston Martin Rapide
4 — Volvo XC70

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