After the sale of Aston Martin to a group which is led by Formula One racing team Prodrive chairman David Richards for $925 million, rumors started that Ford may soon sell the other luxury brands in its Premiere Automotive Group (PAG).
Reuters reported that the remaining luxury brands in Ford’s portfolio of European car manufacturers are estimated to be worth $ 9 billion. While a large sum is involved if Ford opts to sell the remaining luxury brands, Merrill Lynch analyst John Murphy said that such a move is improbable in the near future.
Ford commented on the date of the sale of Aston Martin that they have no plans to sell what is left of their Premiere Automotive Group. Although Ford has commented on the issue, speculations still run in the automotive industry. The reasoning for the speculated sale of Volvo Cars, Jaguar, and Land Rover is a continued financial problem for the Detroit based car maker.
Although the company has already put in motion their restructuring plan, there are still experts in the field who think that if the plan falters or fails to bring the struggling car maker back to profitability, the sale of the three remaining brands will be inevitable.
Last year, Ford posted the biggest loss in its history and the luxury lineup is accounted for the loss of $327 million in 2006. Murphy commented that “the high multiple awarded to Aston indicates that the other PAG brands may be valuable sources of liquidity for Ford, although the company’s repeated commentary indicates that they are not for sale.” He added that: “However, given the potential need for liquidity in the next few years all options may be on the table in the future, especially if (Ford’s restructuring) is not materially accelerated or falters.”
Murphy stated further that the combined sale of the Jaguar and Land Rover brands will fetch a price from $1.3 billion to $1.5 billion. Meanwhile, he estimated that the sale of the Swedish brand Volvo Cars will be in the $8 billion range. That is a whole lot of money that Ford needs in case it runs into more financial problems. Murphy added that the sale of Jaguar is “most likely” due to the struggling status of the brand.
While the company is not yet looking for a way to stop their financial woes by selling another brand, the sale of another luxury brand might serve as a Honda bumper in absorbing the impact of the company’s financial problems.
By: Katie Jones