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News of a deal for Ford Motor Co.'s luxury brands could come by year's end, according to a Reuters report Dec. 3 citing comments from the company's CEO Alan Mulally, and three potential acquirers seem to be in the running.
India's Mahindra & Mahindra Ltd. officially joined the fray Nov. 20, confirming it had linked up with Apollo Management LP on a bid for Jaguar and Land Rover, according to a Wall Street Journal report. One Equity Partners is also believed to be a finalist, as is another Indian carmaker, Tata Motors Inc., which got a boost from Ford's labor unions Nov. 21, saying that while they still oppose a buyout, Tata is the only would-be acquirer they support. Also Dec. 3, the automaker reported a .4% increase in U.S. sales, the first sales gain in a year for the company. Early November was pretty good for Ford. The company said Nov. 8 its third-quarter loss was lower than expected and that it has made strides in its restructuring process. Ford claimed to have achieved $1.8 billion in annual cost savings in the first nine months of 2007. The news comes just days after Ford inked a deal with the United Auto Workers, which includes the establishment of a union-run trust to fund future retiree healthcare costs and a two-tiered wage scale for new employees. The company expects that too will improve future results. Ford also noted progress in its efforts to sell off the brands, which could lead to a deal by year's end or early next year. It looked in September like there were four left in the running for Jaguar and Land Rover. Mahindra (which is now bidding alongside Apollo) and private equity firm Cerberus Capital Management LP -- which in May took control of Chrysler LLC from DaimlerChrysler AG through a $7.4 billion deal for 80.1% of the U.S. automaker -- were reported to have dropped out of the bidding for the units Ford put on the block to help shore up cash for its turnaround. Among those four possibilities sources told The Deal at the time were buyout shops TPG and Ripplewood Holdings LLC in addition to One Equity Parters and Tata. Ford is aggressively pursuing its chosen course as it faces the daunting task of turning around a boat of an ailing automaker squeezed in a tight spot. Looking to raise cash, the company confirmed June 12 after accounts from U.K. media June 11 reported Ford had tapped bankers for help. While Ford had hoped to hang onto Volvo, the third of these premium brands, it said it was willing to hear offers given its cash constraints and interest in the other brands, a source told The Deal's Lou Whiteman, adding that the company, however, would have to be "overwhelmed" by an offer to pull the trigger. According to a New York Times report, opening bids for Jaguar and Land Rover came due July 19, and the brands drew strong interest. On June 12, Alchemy Partners managing partner Jon Moulton confirmed his interest during a BBC radio interview. Seven years earlier, the firm made a play for MG Rover Group Ltd., then owned by BMW AG. BMW sold the Land Rover business to Ford. On June 13, The Independent said Apollo Management LP, Cerberus Capital Management LP and Blackstone Group LP were interested. The buzz came two weeks after a Swedish media report indicated Ford was looking for a buyer for its Volvo division, citing German automaker BMW as a possible bidder, a rumor Ford officially denies. In a similar move to shore up some cash, the motor company agreed in March to sell its racing brand Aston Martin to a group that includes David Richards, the chairman of Prodrive, which runs its racing team, and Kuwaiti investors Investment Dar and Adeem Investment Co., in a deal that values the unit at $925 million. Ford said it plans to retain a $77 million stake. The four brands are part of Ford's money-losing Premier Automotive Group, a lot that some estimate could yield the automaker up to $10 billion in cash, as Whiteman points out. Ford's turnaround isn't coming cheap. The company said Feb. 28 it will cost upwards of $11 billion, more than half of which will be set aside for benefits and pensions due laid-off workers. The first $10 billion was spent in 2006, and the remaining $1 billion came in the first quarter of 2007. The ailing automaker lost $12.7 billion in 2006. As Whiteman noted, Ford's then-relatively new CEO Mulally said in a statement announcing the 2006 results: "We began aggressive actions in 2006 to restructure our automotive business so we can operate profitably at lower volumes and with a product mix that better reflects consumer demand for smaller, more fuel efficient vehicles. We fully recognize our business reality and are dealing with it. We have a plan, and we are on track to deliver." In December 2006, the company announced a corporate realignment aimed at distancing itself from its image of old, featuring a strong focus on global markets, a new head of global product development and several managers reporting directly to chief executive Mulally, who, just three months after he replaced Bill Ford Jr., was clearly steering his own ship. "'This is a first sign that this is Mulally's organization instead of Bill Ford's,' said John Novak, an analyst in Chicago for Morningstar," Bloomberg reported. The news comes two weeks after Ford unveiled plans to seek $18 billion in new loans and said that nearly half of its United Auto Workers-represented employees agreed to buyouts. A month earlier, Ford reported $5.8 billion in losses for the third-quarter, signaling continued challenges ahead for the company. That news came just days after a report in the Financial Times Oct. 20 that LVMH Moët Hennessy Louis Vuitton SA's chairman and a Belgian financier were putting a bid together for Ford-owned luxury brand Aston Martin (something The Deal's Matthew Wurtzel had suggested back in early September). The Aston Martin sale coupled with the sale of Land Rover and Jaguar would help the company free up cash, but the question remains: What can save U.S. automakers? Private equity, perhaps. On the same day DaimlerChrysler AG, the parent of Ford's domestic peer Chrysler, announced a $7.4 billion, 80.1% stake sale in the Michigan automaker to Cerberus Capital Management LP, Bloomberg reported May 14, 2007, that Ford's founding family may be considering a stake sale. GRINDING THE GEARS In the fall, the company's executives were dropping like flies. Steve Hamp, chairman Bill Ford Jr.'s brother-in-law, said he would leave the company Oct. 31, when his role of chief of staff is eliminated. Just a month earlier, Ford was removed from his CEO role and replaced by Mulally in September. The executive shift came on the heels of the company's latest move to fend off bankruptcy with a restructuring plan that includes cutting 10,000 white-collar jobs, shutting two facilities and offering buyouts to all of its hourly employees. The latest round of cuts at Ford follow the trimming of 4,000 jobs and the shuttering of 14 plants earlier this year, later deemed insufficient as the company posted $1.5 billion in losses for the first six months of 2006. Ahead of the company's announcement Sept. 15, Ford said in August that it intended to cut production in the fourth quarter by 21%, or 168,000 vehicles. For the full year, Ford said it planned to produce 3.048 million vehicles in North America, a 9% reduction from 2005. Earlier in September, Ford hired Mulally, who was credited with reviving Boeing Co.'s commercial airline division. The cost-cutting actions marked Mulally's first steps in the new role.
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