Ford Eyes Radical Restructuring of Land Rover

Strategic Insights -

Ford's acquisition of Land Rover from BMW for Euros 3 billion has raised concerns over the brand's competitiveness and cost position. Wolfgang Reitzle, chairman of Ford's Premier Automotive Group, has stated that the business is handicapped by productivity problems and a reliance on sterling-denominated components sourced in the UK. As part of a radical analysis of Land Rover's cost structure and product plans, Ford is expected to seek more component and platform sharing on future models, potentially reducing costs and increasing profits.

Key Takeaways:

  • Ford has identified productivity problems and a cost position handicap as major challenges for Land Rover, with Reitzle stating that the business must come up to competitive levels.
  • The brand's reliance on sterling-denominated components sourced in the UK is seen as a major issue, with Reitzle suggesting that sourcing decisions will dictate future reorganization needs.
  • Industry analysts expect Ford to reduce costs by seeking more component and platform sharing on future Land Rover models.
  • Land Rover lost Euros 60m last year, with analysts believing the brand could have made a Euros 300m profit.
  • Ford is expected to increase spending to make Land Rover a bigger brand with new products, with Reitzle stating that the company "has billions to spend" on development.
  • The acquisition of Land Rover from BMW includes the Solihull plant, near Birmingham, and the Gaydon engineering centre in Warwickshire.
  • Jaguar, another Ford subsidiary, plans to launch a product offensive, with testing facilities at Gaydon to be used for new cars.
  • The pre-tax level of profitability is not expected to return to profit for at least two years.

Statistics:

  • Land Rover lost Euros 60m last year (Source: Merrill Lynch)
  • The brand could have made a Euros 300m profit (Source: Merrill Lynch)
  • Ford will spend Pounds 50m on upgrading the Jaguar site (Source: Company statement)
  • Land Rover has approximately 13,000 workers joining the Premier Automotive Group (Source: Company statement)
  • The Euro-denominated deficit reported by Rover Group was Euros 1.2bn (Source: Company statement)
  • The expected timeline for returning to pre-tax profitability is at least two years (Source: Industry analysts)

Sources:

  • "Ford Pays Euro 3bn for Land Rover" - Financial Times, no date given
  • Merrill Lynch, press statement (no date given)
  • Industry analyst Stephen Reitman, quoted in company press statement (no date given)
  • Company press statement regarding Jaguar site upgrade, no date given