On the way forward

Ford is selling off expensive and very expensive brands

The oldest American auto giant Ford Motor Co. decided to part with the famous sports brand Aston Martin. This decision, according to the company's chief executive officer Bill Ford, is part of a review of the asset structure, Bloomberg reports.

The once prestigious British concern, known for its James Bond films, began to experience financial difficulties. Expensive classic race cars, which cost more than $100 thousand, are not in great demand. As Mr. Ford noted, Aston Martin vehicles, their distribution networks and production organization are so different from other Ford assets that selling the luxury asset seems the most logical choice.

Strengthening its presence in emerging markets, including Russian, Ford, being conservative and “tailored” to the American standard, does not always resist competition. Once popular in America, SUVs have become prohibitively expensive as fuel prices continue to rise. However, leading American automakers failed to painlessly rebuild their production lines, losing the baton to Japanese competitors. In the first half of 2006, the net loss of the second largest automaker in the United States amounted to $1.44 billion. And last year, the concern calculated losses due to falling sales in the United States and Canada - $1.6 billion. To avoid collapse, Ford took reasonable the decision to part with the least promising brands in the short term.

The American company bought a controlling stake in Aston Martin in 1987, and seven years later acquired the remaining shares. Aston Martin later joined the so-called Premier Automotive Group (PAG), consisting of Ford-owned luxury and very expensive brands. This also includes Lincoln, Volvo, Jaguar and Land Rover. The last two companies were also put up for sale. At one time, the PAG division was formed by the former head of Ford, Jacques Nasser, who was fired from the company five years ago. Some Western media outlets suggest that he will lead a group of investors who have decided to buy three luxury brands from the concern. One Equity Partners LLC, a division of JPMorgan Chase & Co., is considered another possible buyer.

Ford's global sale doesn't stop there. Recently, the company's management decided to part with the most profitable of its divisions - Ford Credit, explaining this by restructuring. This attack really surprised many experts, since Ford Credit is the only subsidiary that managed to finish the second quarter of the 2006 financial year so successfully - with a profit of $441 million. In 2005, Ford Credit earned $14 billion from providing financing, the volume of loans issued loans reached almost $110 billion.

Still, Mr. Ford is confident in his actions. To develop a holistic cost-cutting strategy, he specifically hired former Goldman Sachs Group executive Kenneth Leath, who specializes in creating profitable asset and brand structures. Mr. Leath will help complete a large-scale reorganization and production reduction program that has been implemented since January amid chronic losses. The ambitious rescue restructuring plan was called "The Path Forward". As the company's management previously stated, its program provides for the reduction of up to 30 thousand jobs and the closure of 14 factories over the next six years. Now Bill Ford is doing everything possible to convince shareholders and the public that his policies are correct.

The top manager plans to present a new series of arguments in favor of his plan at the next meeting of the board of directors on September 14. It is expected that the meeting will propose a new plan, including more radical measures, such as accelerated reductions and plant closures and an offer to buy a stake in Japanese Mazda.

Denis UVAROV