History is littered with car companies that have been bought and sold, some being more successful than others, some no longer exist and once iconic brands have now bitten the dust.  Many car companies received significant government incentives in the 1960s and 70s to establish their plants in particular regions or countries and some car companies became more famous when they went out of business than when they were in business.  A good example is DeLorean, that famous brand that was set up in the 1970s.  Can you imagine a Private Equity firm stepping in to save that particular company from going out of business. What about if they had been able to look into the future and see that in fact the car company they were going to buy would make more money from image and film rights than any other car in history and would become worth more than the actual car company many times over.  Ironic then that a car that was able to travel backwards and forwards in time was unable to see the destiny of the company manufacturing it!

Private Equity companies have been buying up companies in many different industries for years, but for some reason they have stayed away from investing large amounts of money into the automotive industry.  Now, with the global automotive industry offering zero growth in some markets around the world and the ability to acquire companies at knock down prices, so long as they absorb a company’s debt, automotive companies are becoming very attractive to this investment community. 

In recent weeks we have seen Chrysler being bought by the Private Equity company called Cerberus and not content with acquiring one of the world’s most well known automotive brands they are now thinking of putting in an offer for other brands such as Jaguar and Land Rover.   We learnt a couple of weeks ago that Ford wanted to offload Jaguar and Land Rover and Cerberus seem to be a very credible company to want to take them over.  This would make Cerberus into an ‘automotive powerhouse’, admittedly there would be significant restructuring involved across all three companies but you have to ask the question, why would they go to the trouble, especially as a company the size of Ford has not been able to grow Jaguar and Land Rover in the way they would have liked.   

Private Equity companies have a few things going for them, they have plenty of money, they have the ability to appoint a flexible management structure in the companies they take over and they have a hunger or determination to succeed.  Restructuring a car company is a long term business, after all most Private Equity or Venture Capital companies would look to make an investment and sell the business on within 5 years in order to try and make a profit. With a car company it is different, cars can take three to four years to develop and bring to market and any financial return won’t be seen for a few years after that, assuming everything goes to plan.  Now when you consider for example that nearly all of Jaguar’s cars will have to be replaced in the near future, this will put an incredible amount of pressure on a Private Equity company such as Cerberus to succeed. 

So whilst a Private Equity company is busy restructuring the companies they acquire and they strive to get them focused on what they do best, in this case producing vehicles or automotive related components, they will also be looking at how costs can be cut significantly across their business.   At the same time they will not want to interfere with a company’s supply chain infrastructure and trading partner relationships that have been built up over the years  must, where possible, be preserved.  So while Private Equity companies are busy restructuring the operations and finances of the companies they buy it would make sense for them to outsource other areas of the business in order to streamline the company’s cost structure. 

GXS are well positioned to be able to assist a Private Equity company with the complete outsourcing of the B2B infrastructures associated with the companies that they acquire.  Everything from managing the e-commerce platform, through to managing their trading partner community, whether this is local to the manufacturing plant or in other regions of the world.  GXS has a presence in nearly all of the main manufacturing centres around the world and our unrivalled local language support in these regions can really make a difference when trying to strengthen trading partner relationships. GXS has invested a significant amount of money in our best in class B2B trading platform called Trading Grid® and Private Equity companies would be safe in the knowledge that the customers and suppliers of the companies they acquire were being looked after by a company with nearly 20 years experience of managing outsourced B2B environments.  For further information about GXS Managed Services why not take a look around our Managed Services Microsite….

Therefore in summary, Private Equity companies have extensive experience of financing and restructuring companies, however they do not, in most cases, know how to run a global B2B infrastructure, this is where GXS can provide assistance. Also, for these acquisitions to move forwards and be successful, these companies are going to have to go back to focussing on core business activities, perhaps ‘Back to the Future’ is a good strategy to follow after all!

So the big news this week is that Ford are thinking of selling Jaguar and Land Rover, two iconic car manufacturers who have been at the heart of the British motor industry for many years.  Ford is currently going through major restructuring and despite significant investment in trying to turn around the fortunes of Jaguar and Land Rover it looks as though Ford may be about to throw in the towel. 

Jaguar has seen significant investment from Ford and some will say that it is Jaguar that is causing part of Ford’s current financial problems.  Despite billions being invested since Jaguar was acquired in 1989, they have struggled to turn the business around and make them into a profitable organisation.  The problems may be down to their design strategy, always playing safe in order to not lose the ‘Britishness’ of their designs, but whereas BMW and Audi were willing to be more adventurous with their designs, Jaguar didn’t want to take the risk.  It was only with the launch of the new Jaguar XK two years ago that we started to see a new design direction for the company.

Jaguar have new models coming down the line, but with an impending sale on the way, this could once again affect their future model plans.  Jaguar tried very hard to copy the various segments that Audi, BMW and Mercedes were in, but they have failed for one reason or another, and I think for their long term future they need to reduce their production volumes and focus on developing cars that their customer want rather than what Jaguar thinks they want.  If you look at their former sister company Aston Martin, you will see what I mean, Ford totally transformed the business, once again invested a significant amount of money, but they developed desirable cars which could compete head to head with their rivals such as Porsche and to some extent Ferrari.  Aston was acquired by Dave Richard’s Prodrive organisation a few months ago, with significant investment from Private Equity companies, and I am sure that Aston will now go on to bigger and better things now that they are independent, financially speaking, from Ford.  All it wants now is for someone to do the same thing with Jaguar, but there is a problem.

That problem is Land Rover, you see as part of Ford’s drive to cut costs across Premier Automotive Group (PAG), it introduced a shared product development strategy between Jaguar and Land Rover.  Given the relative proximity of the Jaguar and Land Rover design and manufacturing plants in the UK, it made sense to try and share costs between the two marques. This also had an impact on their respective supply chains to such an extent that they now share suppliers across key components.  In addition they also have shared dealership networks, for example quite often in the UK you will see a Jaguar dealership right next to or part of a Land Rover dealership, this helps to reduce car transportation / logistics costs and other overheads that would be normally incurred if they were run as two totally separate dealerships.  As Volvo is also part of PAG, you will also see their dealerships close to other Jaguar and Land Rover dealerships. 

Land Rover is probably the more successful brand within PAG, they have improved the quality of their vehicles beyond recognition and some will say that BMW had a strong influence on quality improvement at Land Rover when they owned them a few years ago.  Land Rover could be an interesting acquisition for an OEM who doesn’t currently have a strong 4×4 offering within their portfolio.  This may explain why both Renault and Fiat expressed, and then quickly declined, an interest in acquiring Land Rover.

Ford has a very comprehensive product development environment and Jaguar and Land Rover cars are designed using the same computer aided design system.  In addition, all their back office systems are tightly integrated and they use complex web based management information systems to keep track of vehicle development progress.  If you also combine this with a shared supply chain strategy, shared component strategy and even a shared dealership and aftermarket parts network strategy you can begin to see that actually selling Jaguar and Land Rover as a joint package would actually make sense.  But who will buy these two companies?, well I guess it will probably be a Private Equity company as many of the other OEMs are undergoing restructuring and cost saving strategies themselves.  One thing is for sure that the brand value of both of these companies is very strong, so I personally think that their long term future will be OK, so long as they find the right buyer , I guess only time will tell.

Oh and apologies for including a couple of gratuitous car shots in this post

I was fortunate to visit one of our data centres last week, we were holding a partner event at our office in Amstelveen, Amsterdam. GXS have a number of partners across Europe who resell our solutions (and I will discuss this in more detail in another blog entry), this provides us with the ability to support customers in areas of Europe where we don’t have an office.  The reason for holding the event at Amstelveen was to show the partners our data centre, this is one of two centres that GXS operate to support our global Trading Grid (R) B2B platform.

I have been with GXS for just over a year now and this was the first opportunity I had to visit one of our data centres.  This facility has been in operation since the early 1970s and is located in a fairly anonymous building in Amstelveen.   But where did these large data centres come from and what was the driver for their development?

It was during the 1950s and 1960s that large defence related budgets helped to establish some of the earliest computer data centres. Indeed NASA was infamous in establishing one of the world’s first data centres, to help with their space programme.  It was the early pioneering work on these lavish data centres that led to the development of today’s data centre infrastructures.   During the 1970s General Electric started to develop global IT networks and developed one of the first networks for sending and receiving emails.  The data centre I visited last week was originally part of GE’s global IT infrastructure, until the GE Information Systems division was divested and sold to GXS current owner, Francisco Partners. 

I mentioned in an earlier post that GXS had recently spent millions of dollars upgrading its data centre infrastructure, both in Amstelveen and Ohio in the U.S.   It was very clear to see where that money had been spent, new eGenera Blade Servers, EMC mass storage devices and state of the art Cisco network routers.   The other significant benefit that this technology brings is that it requires a much smaller footprint to house, compared to the old servers etc.  So not only are the computers and mass storage devices becoming a lot smaller, the facilities and number of people running the facility are also relatively small as well.  It was quite a surprise to see that this facility is run by a handful of people. 

So what will the next generation of data centre look like? Well I found this article over on sun.com the other week, describing how Sun Microsystems had developed a data centre within a forty foot shipping container. 

Known as the ‘Black Box’, it effectively contains everything required to run a standalone data centre.  Given the time and effort normally required to set up a data centre, being able to have something turn up, unloaded from the back of a lorry and switched on to begin processing almost immediately must seem like a dream come true for today’s CIO.   

Anyway, GXS will continue to invest in their data centre infrastructure to ensure that it remains a best in class facility that will allow their customers to have access to the most reliable and highly available B2B trading platform on the market today.