Ford and the PAG lifeboat

Speculation has resurfaced that Ford is looking to relieve itself of its Premier Automotive Group (PAG) burden. There are reports that the company has ordered the investment banks Goldman Sachs and Morgan Stanley to rid it of its turbulent offspring, Jaguar, along with Land Rover and Volvo. In an article to be published on its website, AutoCognition assesses the role of the PAG portfolio so far and the chances of finding a willing buyer (autocognition.co.uk/).

No one doubts that Ford has had a hard time justifying its investment in PAG, with Jaguar receiving the most vitriolic criticism. Yet not only was the role of PAG within Ford justified on both financial and operational grounds, it was only Ford’s lack of commitment that has meant that the benefits have been so long coming. After the divesture of Aston Martin the group is now focused around the continuing strengths at Volvo, stellar improvements at Land Rover and a new confidence at Jaguar.

AutoCognition has evaluated what the PAG brands can offer to the rest of the automotive industry and finds that there are few potential takers. It seems that global consolidation has reached its limits and car manufacturers prefer to bring order to their own houses rather than be distracted by new acquisitions. If Ford must sell PAG then the cohesiveness of the three brands suggest that they should be sold as a single, autonomous unit. It is unlikely that equity markets would look kindly on having a new automotive group dumped on them so recent experience points to another dashing raid by private equity firms.

The problem for Ford is that a sale would provide a temporary injection of cash and then it would find itself back where it started: an old mass market brand defending itself against the rise of the premium brand manufacturers. AutoCognition wonders if Ford might have mistaken the lifeboats for ballast.