The Business News Source

Ailing giant car company Ford, has decided it needs to focus on its core product set and is starting the process of dumping its ‘vanity’ projects. Bill Ford announced that the first company from its so-called Premier Automotive Group, Aston Martin would be put on the block and auctioned off.

Ford is reckoning on getting $2 billion for the Luxury car manufacturer, which famously featured in many of the James Bond movies and reached an iconic status because of it. Ford has appointed an investment bank to handle to deal. Last month Ford hired Kenneth Leet, a former Goldman Sachs banker to guide it through the maze. Ford lost $1.3 billion in the first half of the year.

Until 2005 Aston Martin had never made a profit, Ford took a stake in the company in 1987. Since then the company has shown strong recovery, with investment in a new automated factory, moving away from hand building each car individually.  Aston Martin sold 4,500 cars last year, although that sounds small; it’s a significant increase on the 46 it sold in 1992.

Although it claims to be in the black now, the last published figures for 2004 show a loss of $16 million. Although Ford is hoping for $2 billion most analysts put the company at a more realistic value of  $500 million.

Feeling high from his recent breaking of a land speed record, owner of Digger company JCB, Sir Anthony Bamford stated last week that he would be interested in taking over Jaguar Motors, he also outlined in the same meeting that he had no interest in the other parts of the Premier Automotive Group, so Aston Martin was off the radar for him.

Ford is doing well to rid itself of these ‘vanity’ projects. The company itself is in dire straights and needs to update and consolidate its production and management processes. As is the case for many US motor companies, there has been too much investment in secondary projects and not enough investment in core markets and products.

Today, it can be argued that US car manufacturers are gridlocked with union agreements and years behind the Japanese in design. With the world moving towards cheaper, better-produced cars that require less gasoline, the US companies need to respond. It’s that old management mantra – FOCUS FOCUS FOCUS.

The European Central Bank will keep interest rates unchanged at today’s governing council meeting, but ECB president Jean-Claude Trichet is likely to signal that the central bank is preparing to hike rates at the following council meeting on Oct 5, economists said.

The ECB raised rates at its last meeting on Aug 3, and has never previously moved rates at two consecutive meetings, so another move this week would be a major surprise.

Jean-Claude Trichet, the bank’s president, announced significant upward revisions to the ECB’s inflation forecasts for this year and next. He said ‘strong vigilance’ was warranted by the bank to defend price stability – code words used to signal an interest rate increase a month ahead – and expected ‘a progressive withdrawal of monetary accommodation’, which implied more than one rise in borrowing costs was likely.

The ECB left its main interest rate unchanged at 3 per cent. But a quarter percentage point rise is now expected at the bank’s meeting in Paris on October 5. Financial markets have penciled in another quarter point rise by the end of the year.

The ECB aims to keep the annual inflation rate at ‘below but close’ to 2 per cent. Data on Thursday showed euro zone inflation dipping to 2.3 per cent in August, from 2.4 per cent in July. However, fresh ECB forecasts showed inflation in a range with a mid-point of 2.4 per cent in 2006 and the same in 2007.

The ECB moves slowly, in many instances it has moved too slowly but in this case its wise to pause. Trichet has pointed the way forward though, and its up. Managing diverse economies under one banner is difficult, with regions often at different economic cycles – the ECB is, however, giving much better guidance than a few years ago.