M & A Roundup: Land Rover Joins Ford’s Luxury Vehicles Group

Ford Motor Co.’s $3 billion purchase of the Land Rover line of sport utility vehicles (SUVs) from BMW AG brings yet another elite brand into the automaker’s Premier Automotive Group, which already houses the Volvo, Jaguar, Aston Martin, and Lincoln Mercury brands. Ford has been aggressively developing its luxury brands since it created its premium group of vehicles last spring. Land Rover rounds out the group nicely with its full range of SUVs, from moderately priced vehicles to luxury models. BMW’s sale to Ford followed the German automaker’s decision to sell its ailing Rover Cars Group and MG sports car units to British venture capital group Alchemy Partners Ltd., which is led by turnaround pro Jon Moulton, a former Coopers & Lybrand restructuring specialist who has a history of buying troubled companies. Analysts speculate that BMW will not remain an independent automaker for long. Automakers are traveling the global route The Land Rover acquisition is one of the latest moves that clearly demonstrates the globalization of automotive consolidations and a shrinkage down to a handful of car makers worldwide. In other recent deals, DaimlerChrysler, itself the result of a transatlantic takeover, agreed to purchase a stake in Japan’s Mitsubishi Motors Corp. for $2 billion. And General Motors Corp. and Fiat SpA of Italy unveiled a strategic alliance that gives GM a 20% interest in Fiat’s automotive unit while Fiat gets a 5% slice of GM. Ford President Jacques Nasser said in a printed statement that Land Rover complements the company’s luxury lineup. “Demographically, Land Rover is more similar to Jaguar than it is to Lincoln or Volvo,” he said. “We are the largest producer of four-wheel vehicles in the world, and Rover is probably one of the smallest.” Ford intends to position Land Rover as a companion to Jaguar. “We think they fit together very well in the showroom,” Nasser said. Jacques Dacosta, senior manager of product research at J.D. Power & Associates, a marketing information and consulting known for its experitse in the areas of consumer opinion and customer satisfaction, believes that Land Rover and Jaguar are extremely complimentary brands and that the opportunities for cross-selling are great. “If you were to profile the customer base, and you went through the garages of Jaguar owners, I wouldn’t be surprised if a high percentage of those also had a Land Rover,” he says. According to his research, many people who own Jaguars tend to own multiple vehicles. “The same is true with Land Rover. These are typically not single-vehicle households,” he says. “Although Ford has taken the stance that it separately markets the various brands in its premium vehicles group, it announced recently that it wants to build super-dealerships, which would encompass all the premium brands under one roof, in order to build a whole experience around this whole group,” adds Dacosta. Land Rover is Ford’s first global brand of SUVs. The company has the Explorer, Navigator, and Expedition models already in its SUV collection, but those brands, says Dacosta, are not exportable; they’re built for North American roads, while Land Rover is built for European and global delivery. The only 4-wheel drive brand that Ford currently has in its premium vehicles group is Navigator, he adds, so the land Rover acquisition shores up Ford’s luxury SUV category. The Land Rover brand does not come to Ford without problems. According to J.D. Powers’ initial quality survey (IQS), which gauges vehicle quality in the first 90 days of ownership, Land Rover generally has ranked at about mid-pack among competitors over the last several years. The brand competes head to head with several brands in the highly competitive luxury SUV category, such as Mercedes’ M-Class, Lexus’ LX 470, and Toyota’s Land Cruiser, says Dacosta. Chris Price, V.P. at PricewaterhouseCoopers Securities, speculates that Range Rover, the top-of-the-line model in the Land Rover line, probably suffers from the same types of electrical problems that Jaguar did which come from integrating many luxury components in one package, he says. Dacosta agrees. “Historically, English cars that have a lot of electrical gadgets have had electrical troubles, but those defects were most problematic in the ’70s and early ’80s,” he remarks. “Ford should be able to improve the brand with its efficiencies and quality improvement capabilities, like it did with Jaguar,” he states.