Tata Motors Emerges as Front-Runner for Jaguar and Land Rover; Toyota Supplants Ford as Second-Largest U.S. Auto Seller; KongZhong Mobile Teams With China Sports Industry; Investors Not Buying London Scottish Bank's Assurances
- Tata Motors Ltd. (TTM), the largest truck maker in India has emerged as the favored bidder for the Jaguar and Land Rover units being sold by Ford Motor Co. (F), Reuters reported. Tata was selected over two rival bidding groups, one backed by a private equity fund run by JP Morgan & Chase (JPM) and one from another large Indian auto company backed U.S. private equity fund Apollo Management. Should Tata land Jaguar and Land Rover, it will be able to expand outside of India with two of the best-known luxury brands in the automotive world. Ford is divesting the division in order to focus on its troubled domestic operations. No firm deal has been reached, but now that Tata has emerged as the front-runner, focused talks will begin immediately. The companies expect to have the transaction details finalized in a matter of weeks. A recent report by Merrill Lynch & Co. Inc. (MER), put the combined value of Jaguar and Land Rover at $1.5 billion. This will be a huge loss for Ford, as it paid $2.5 billion for Jaguar in 1989 and $2.75 billion for Land Rover in 2000. While Ford was able to turn Land Rover around to become profitable, Jaguar has been a consistent money loser and has required additional investments of over $2 billion. After the deal is consummated, the only division left from Ford's attempted overseas diversification will be Volvo Motors, which the company has said is not for sale.
- In other news from the auto industry, Toyota Motor Corp. (TM) has passed Ford Motor Co. (F) as the second-largest automaker in the United States behind General Motors Corp. (GM), the Associated Press reported. Toyota reported that total sales for 2007 were up 3.1% to 2.62 million units while Ford's overall sales had fallen 12% to 2.59 million units. Ford had been the No. 2 car manufacturer in the United States for 75 years. General Motors remains the domestic leader with 3.7 million vehicles sold in 2007 despite a 6% decline in overall sales. In sales reports released yesterday (Thursday), Ford said that retail sales had dropped 10% while fleet sales dropped 18%. The largest shortfall was in the sales to daily rental car agencies, which fell 32% compared to 2006. Toyota attributed its overall success to the continued growth of the Lexus division, which retained its spot as the best selling luxury car in the United States for the eighth year in a row. It also received a surprisingly strong contribution from the Scion line of compact cars, which sold over 130,000 units. Overall, the combined results for auto sales were the worst since 1998 and many analysts expect the difficult selling environment to continue into 2008. Globally, Toyota is now the world's largest manufacturer with 9.52 million units ahead of General Motors' 9.284 million vehicles.
- Beijing, China-based wireless entertainment company KongZhong Corp. (KONG) announced yesterday (Thursday) that it had signed a strategic partnership agreement with China Sports Industry Group Co., Ltd. to explore and develop sports-related content for mobile phones. China Sports is the largest publicly traded company in the sports industry and is controlled by its largest shareholder, the General Administration of Sports of China, a government agency. Nick Yan, president of KhongZhong, said that he was happy with the agreement and pointed out that 2008 is China's Olympic year when the nation will be on the world's pinnacle sports stage. Investors were also happy, with KhongZhong shares up over 12% in mid-afternoon trading on the NASDAQ index.
- According to the Financial Times, shares of U.K.-based subprime lender London Scottish Bank PLC continued to fall as the market doesn't seem to accept management's assurances that it would address its deepening balance sheet problems. The company recently announced that it would have to take a charge of almost $45 million as loan defaults continued to rise. As a result, the bank has fallen short of the capital standards set by the Financial Services Authority by as much as $26 million. Robin Ashton, the recently appointed chief executive of the troubled lender, has tried to reassure regulators and investors by telling them that the bank has agreements with other banks as well as fixed-term deposits on hand. He said that the liquidity position of London Scottish Bank was as strong as it has ever been. Ashton also pointed out that although the subprime lending divisions were having difficulties, other divisions were strong. The debt-collection division contributes more than 50% of net profits. The bank is expected to reach an agreement on a plan to restore the capital shortfall with the Financial Services Authority by the time it announces year-end results on Jan. 23. Options available include selling the bank outright, a move some analysts think is the most attractive, as well raising capital through a share offering.