IBS

EMOTION is said to play a part in many car purchases, but it is less likely to be a factor when buying a car company. Even so, the reaction this week to the first pictures of Jaguar's new XF saloon (pictured) will have done nothing to still the beating hearts of the half-dozen or so likely bidders for Jaguar and Land Rover, the two British marques being auctioned together by their beleaguered owner, Ford.

But who will buy it?

It would be hard to exaggerate the importance to Jaguar of the XF, which is certain to be one of the stars of the Frankfurt motor show in September. It represents a complete design departure from the frumpy “retro” look with which Jaguar has saddled its often well-engineered saloons for the last decade. If the XF's swooping lines and elegantly modernist interior are a hit with younger customers who would never previously have thought of owning a Jaguar, then the firm, under new ownership, may have a future after all.

Although Ford has refused to name the prospective buyers, they include Tata Motors (a division of Tata Group, an Indian conglomerate), probably another Indian car company, Mahindra & Mahindra, and at least four private-equity firms. These include Cerberus Capital Management (which relieved Daimler of Chrysler), One Equity Partners, Ripplewood Holdings, and Texas Pacific Group.

All the bidders are now deep into due diligence as they prepare to table non-binding offers at the end of September. As well as poring over the books, they are touring facilities and examining plans for future products. They are also competing in a beauty contest for the backing of potentially hostile unions, which fear for the jobs of 19,000 members employed in several British factories. Ford is publicly confident of concluding a sale by early next year at the latest. But reaching a sensible valuation of the two marques, which Ford says must be sold together because their operations have become so tightly integrated, is not proving easy.

Judging how far the XF will halt the slide in Jaguar's fortunes—its sales have fallen by almost half from a peak of 130,000 a few years ago—is only one question among many. How long will the weak dollar eat into the sales and earnings of both makers? Is it necessary to have three factories and a separate design centre to build fewer than 270,000 cars a year? What will happen to Jaguar and Land Rover, which make relatively big and thirsty vehicles, if the European Commission goes ahead with its plan to impose upon car manufacturers an average CO₂ emission target of 130g/km by 2012? And how will the onset of a global credit squeeze affect what private-equity groups can pay for a capital-intensive business with a time horizon of three to five years?

The answer to the last two questions may depend on the kind of deal that Ford is prepared to do. All the possible bidders seem likely to want something similar to that wrung from Daimler by Cerberus. The German firm not only agreed to hold on to a 20% equity stake in Chrysler, but also provided substantial financing. Any new owner will want to ensure that Ford retains an interest in the future of the business, in part because it may be possible to persuade the commission to count Jaguar and Land Rover as part of Ford's bigger and more economical range for the purpose of measuring emissions.

As for Ford, its priority is just to get a respectable deal done. Alan Mulally, its chief executive, is adamant that running luxury brands has no part in the company's future. He also concedes that the credit market's tightening “absolutely is an issue”. Lovely though the XF may be, Mr Mulally wants someone else to be its proud owner as soon as possible.