Monday, July 20, 2009
Fortunate Ford and Tough-Luck Tata
One of those moves was selling Jaguar and Land Rover to Tata Motors Ltd. before the global economic downturn started to smack automakers. The $2.3-billion deal for the two brands, which originally cost Ford $5.3 billion, was announced in March 2008 and completed in June.
By the time Tata took over JLR, Europe already had started a 13-month new-car sales slide, which finally ended last month.
The recession has been particularly tough on the makers of premium cars as they have seen little benefit from scrapping incentives. In the first half, JLR's European sales were down 39.1 percent to 41,907, according to the European automakers association, ACEA.
Declining sales have forced Tata to cut 2,000 JLR jobs. Last week the Indian automaker announced 300 more posts would be slashed along with production of the X-Type at JLR's plant in Halewood, north England. Last month, Tata executives said that JLR made an after-tax loss of 306 million pounds ($501.5 million) in the 10 months to the end of March. The decline pushed Tata Motors to its first loss in eight years.
Tata's tough luck is Ford's good fortune. Most of those JLR job cuts are happening in the U.K., where Ford has been the top-selling brand for 32 years. If Ford had to make those job and production cuts, it is likely that there would have been a backlash against the automaker in the U.K. A decline there would have made it tougher for Ford to keep churning out money in Europe, where the automaker reported a 2008 pretax profit of $1.06 billion, up from $997 million in 2007. Trouble in Europe would have made Ford's $14.6 billion net loss in 2008 even worse.
Would that have forced Ford into Chapter 11 like General Motors and Chrysler? Probably not, but it definitely would not have helped. Although Ford lost money when it d good bye to the British brands, selling them when it did has proved to be one of Ford's best moves in a long time.
DATED: 20.07.09
FEED: ANE
