Private equity firms waiting if Ford opts to sell

Jun 13 2007 by Bill Gleeson, Liverpool Daily Post

THERE is a very firm belief that Ford wants to sell its Jaguar and Land Rover operations.

Although the company itself has yet to say so, most observers have read between the lines and concluded a sale is inevitable, if not imminent.

The group has tried and failed to make a worthwhile return from its involvement with these upmarket brands. Ford’s troubles in the US, where it is losing pots of money, have forced its hand. Ford must act to turn around its fortunes.

The losses have piled up at Ford, and Jaguar’s cumulative contribution to that can be measured in the billions of pounds in the past few years.

The likelihood is that the Jaguar and Land Rover operation will be sold to a private equity buyer. Interest from that sector is hardly unexpected. Alchemy Partners, for instance, tried and failed to buy Rover a few years back. Some believe that had Alchemy got their hands on it, Rover would still be producing cars in volume at Longbridge today.

It seems certain that Ford’s senior management will be taking radical action to stop the losses. While the trade union movement is highly suspicious of the motives of private equity investors, it may be better for the staff and British industry if Alchemy, or their like, gained control. Private equity investors are more likely to secure profitability than Ford.

The 2,000 staff who earn their living from the group’s Halewood plant, where both Land Rovers and Jaguars are made, have on their side the fact that it is the most productive factory in the group. As a result it is the plant that is least likely to be closed.

WHAT’S the problem with TJ Hughes? It has struggled to turn in a strong performance for what seems like a decade now.

Back in 2001, TJ’s hit the headlines when, as a publicly quoted company, its shares crashed 36% in a day when it revealed accounting problems meant that it had to write off £3m.

Then in 2002, JJB Sports acquired TJ’s only to ditch it in 2003. The management team that bought it back from JJB was ousted two years later, presumably because PPM Ventures, the private equity backers that now own the stores group, wasn’t satisfied with progress. Just last week the new management that replaced the ousted lot also got fired due to concerns about the poor financial performance of the business. Back in 2004, the incoming management had hoped to increase the number of stores from just under 40 to nearer 200.

TJ’s, an almost iconic name in Liverpool, may be finding it harder going in other parts of the country where it has to compete with more established high street names.

Another factor may be that shopping trends are changing fast and consumers are no longer prepared to pay for cheap products if it turns out they are tat.

The discount store model has always been highly dependent on expert buyers who can spot a good opportunity to purchase low cost stock that will sell. That task may be proving harder to perform these days.

The latest appointee to run TJ’s is Sue Tennant. She is returning to her former haunt, having been part of one of the former management teams. As a buyer by background, it will be fascinating to see if she is success during. We wish her well.