Is Ford (NYSE: F ) gettin' while the gettin's good?
The company recently lost to Toyota (NYSE: TM ) as the second-largest car maker in the United States, and it's now preparing to sell the premium Jaguar and Land Rover brands to India's Tata Motors (NYSE: TTM ) . Evidence suggests that Henry Ford's corporate descendants might be wisely choosing to focus more on the company's core brands.
Despite the prestige associated with the names Jaguar and Land Rover, the products have been a mixed bag for Ford this year. Jaguar's U.S. sales declined 24% in 2007, but Land Rover -- which primarily consists of gas-guzzling SUVs -- actually rose almost 4% compared to the year before. And those numbers would have been better if December hadn't been so horrible -- sales fell nearly 19% for the month.
Luxury items in general are on the decline. Luxury names like Tiffany (NYSE: TIF ) , Coach (NYSE: COH ) , and Nordstrom (NYSE: JWN ) have been whacked recently for either weak comps or reduced guidance. Letting Tata deal with the headache of declining interest in luxury cars might be a smart move for Ford.
This doesn't mean Ford will be making out on the deal, though. Ford purchased Jaguar for $2.5 billion in 1989, and paid $2.7 billion in 2000 for Land Rover. According to The Associated Press, Ford will likely pull in less for the pair than it paid for either brand individually.
Still, the Ford Edge is more in line with the company's future. In its first full year of production, the Edge edged out Ford's expectations by 30%; the company sold more than 130,000 units of the crossover vehicle. The low-priced Focus was one of the few other highlights in a dismal sales year. Yet that aligns well with Ford's plan to sell a cheap car in India (though perhaps not as cheap as rival Tata's $2,500 model), casting Ford as more of an Everyman's automaker.
Not that that's bad. Making sales with a pedestrian line of cars is far more preferable than having the cachet of a money-losing luxury brand. As the economy worsens and high-priced prestige names start feeling the pinch in their pocketbooks, Ford's decision to take the low road means it may yet regain its former glory.
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