PAG for sale

Bill Ford might have recently said Jaguar isn't for sale, but merchant bank UBS has been appointed to look for buyers for key chunks of the company's Premier Automotive Group, especially Jaguar, Land Rover, and Aston Martin. Ford apparently wants $10 billion for its high-profile European brands (not clear whether Volvo is included in the plan).

Who'd pay it? Hyundai apparently performed a due-diligence investigation on Jaguar, but then turned down any notion of a deal. Subsidiary Kia also looked at Jaguar, but Hyundai reportedly told them to back off.

Toyota has the cash, but not much of a reason. Insiders believe Lexus already does a better job than Jaguar in the premium sector and has a broader product range that includes SUVs.

That leaves the Chinese automakers, some of which have the money and the ambition. The problem with any deal, say PAG insiders, is that, while the Jaguar brand itself is valuable, few buyers want the baggage (relatively high-cost factories and workforce in the U.K.) that comes with it. And buying Jaguar means buying profitable Land Rover, too, as the two brands are functionally one company behind the scenes.

Selling Aston Martin is a different issue. Aston is a small company, and CEO Ulrich Bez embodies much of its engineering vision and knows the dealers and the individual Aston collectors who provide useful profit by buying every single version of every single Aston model.

Four years ago, Bez spoke openly about developing the company to the point where it could be sold off as a separate entity and in fact approached Ford some months back with a buyer for the company. But Dearborn decided to put Aston on the open market to see if anyone would be willing to pay more. Most of the venture capital groups looking at Aston are eager to work with Bez in a management buyout. But can Aston stay profitable as an independent?

Aston has a new factory. The platform that supports the DB9 and Vantage is modern and paid for. The racing activity (soon to encompass GT racing for the Vantage as well as a one-make series for it) is well founded and funded by privateers. Aston's engineering is efficient: The company has fewer than 300 engineers and relies little on parent Ford for technical support. Contrast that with the near-1000 engineers employed by Bentley. On the other hand, there's still expensive work to do, including developing a new Vanquish flagship.

Selling PAG might bring Ford short-term cash, but isn't going to make the slightest difference to Ford's share price or its ability to raise capital through bond issues (it's rated junk). For that, new Ford CEO Alan Mulally will have to get the confidence of the analysts on Wall Street. And no one yet knows how.