A major surprise was sprung last week when Automotive News Europe suggested that Fiat had recently held talks with Ford over a possible purchase of its Jaguar and Land Rover divisions. It caught market watchers completely by surprise and kicked off a feverish week of speculation as to the future of the two English brands. "A possible sale of Jaguar and Land Rover to Fiat was on the table for months, say sources familiar with the talks," reported ANE, before adding that, "the two automakers recently called off the talks."

Although Ford sold its luxury/sports Aston Martin brand in March to a consortium put together by US businessman John Sinders, which also included the Banbury-based Prodrive concern, there had been little speculation that either Jaguar or Land Rover would be the next in line in an expected further shakeup of its Premier Automotive Group (PAG) arm, which also includes Volvo. Instead media speculation had focused on possible interest in Volvo from BMW (Fiat in fact showed an interest in buying Volvo in the late 1990s). "Ford's talks with Fiat started in February and ended late last month," said ANE in its bombshell announcement last week, before specifying that, "they involved Fiat group CEO Sergio Marchionne and Ford of Europe boss Lewis Booth, who also heads Premier Automotive Group."

Fiat CEO Sergio Marchionne ratcheted up expectations in an interview with Italian newspaper La Repubblica last Saturday when he said that Fiat "had a right" to become one of the world's leading three or four big players due to its global reach. Marchionne has also stated several times that an 'acquisition' will be made by 2010. Fiat Group Chairman Luca di Montezemo however gave a categoric "no" when asked last Monday, on the sidelines of a meeting in Milan, if Fiat was negotiating to buy the two English brands, but he didn't reveal whether talks had actualy taken place.
 

ANE meanwhile said that talks had foundered on Fiat's concerns that such a major acquisition (Land Rover is valued at around $2.5 billion) could affect its credit rating. In a significant boost to Fiat Group, rating's agency Standard & Poor's raised Fiat's debt outlook from BB to BB+ at the end of last month putting it just one place away from reaching investment grade status. Achieving investment grade would allow the Fiat Group to access finance more cheaply and widen the appeal of its shares to international investors. However S&P suggested that it will await Fiat's 2007 end of year results before making any further recommendations making a potential major acquisition this year more tricky to absorb.

Increasing global SUV sales inspired Fiat's interest in Land Rover, suggested ANE. "Land Rover is a brand many carmakers would love to add to their portfolios - particularly Fiat Group, whose five brands are still almost nonexistent in the growing global SUV market," a Turin source told the newspaper. He added, reported ANE, that Fiat was especially interested in Land Rover's U.S. dealership network.

The Italian automaker plans to re-launch its Alfa Romeo brand in the United States in 2009, but Alfa's dealership network plans are uncertain. "Alfa's sporty sedans, coupes and the Spider could have been a perfect fit in the Land Rover U.S. dealer environment," a supplier source was quoted by ANE which further suggested that Fiat had considered buying Jaguar mainly for its access to rear-drive platforms and its high-tech V6 and V8 engines.