It’s very nearly a decade since Ford Motor Company bought Jaguar for 1.6bn and I can still hear the howls of anguish from those who thought it was the death knell for this much-loved marque.
As it has turned out, Jaguar is producing some of its prettiest and most highly engineered cars in decades, has lost none of its cachet and, indeed, may have regained some of the snob-appeal that was squandered in the Seventies.
There may not be such an image to protect and enhance with the Volvo motor marque, which Ford acquired from the Swedish vehicles group last week for 4bn. I’m hopelessly out of date when it comes to marque-marketing, still associating Volvos with Puffa-jacketed hoorays, who added a grille behind the back seat so that they could fit a pair of labradors as an optional extra.
Apparently, Volvos are more sophisticated these days, but that is ideal for Ford, if the company intends to apply the same strategy to Volvo as it did to Jaguar. It seems likely that Ford will move the brand downmarket and expand its sales among those who aspire to own a Volvo, but could never quite afford one. This principle has worked for Jaguar – even the spotty-cravat brigade could not deny that.
What Ford is doing, in a rather New Labour and new millennial way, is buying prestigious brands, such as Jaguar and Aston Martin, and marketing them to the masses without undermining their essential premium. A mid-range executive Jaguar saloon emerges from the Castle Bromwich production line this year. I bet it is instantly recognisable as a Jag when it’s out on the road.
Ford is also developing a pan-market range of marques, from Aston Martin and Jaguar at the very top, down through Volvo and Mercury (in the US), to its staple family and small saloons under the Mazda and core Ford brands.
Ford’s chairman until the end of last year, Alex Trotman, prophesied there would be six major car makers dominating the globe within a decade.
Presumably he believes that Ford will be one of them, which leaves one to surmise that the others are likely to be General Motors, the newly merged DaimlerChrysler, Volkswagen and a couple of Japanese in the shape of Honda and Toyota (Nissan having blown it), though I would have thought one or the other would make it into a top six.
I may be missing something, but I can’t work out who will take sixth place, if we presume Honda and Toyota are allocated one place. Certainly not the French with Peugeot Citroë and Renault, and Fiat missed its consolidation opportunity with Volvo. BMW Rover is carving a series of distinct market niches, rather than building a pan-market range. It’s possible that Trotman is thinking of Daewoo.
Anyway, we can be sure that global consolidation in the motor industry, as in so many others, is under way. Last year’s DaimlerChrysler deal served to offer us a paradigm, if one were needed. The obvious question to ask is whether this is a good thing.
And the fairly obvious answer, in commercial terms, is yes. Consolidation has to be healthy in an industry which runs on such eye-wateringly tight operating margins.
Global marketing mobility also puts paid to the kind of protectionism and counter-protectionism that has bedevilled the motor industry from Japan to the US to France. There’s nothing like local plant employing domestic labour to concentrate the minds of combative governments.
At the anti-trust level, too, I think the trend is to be applauded rather than constrained. It’s not just that there is sufficient pluralism in the industry to ensure continued competitive pressures, though that is undoubtedly true. It’s also that those operating margins – typically two per cent – force the major players in the industry to raise their game, rather than apply economies of scale.
Of course, factories close when industries consolidate. But it’s not enough for vehicle manufacturers just to strip out overheads.
They have no margin to sacrifice at the retail end – literally no margin of error – and so are forced to pass overhead savings on to the customer through keener prices and improved product.
A case in point is the Ford marque, the quality of which today bears no comparison with the Dagenham Dustbins of yesteryear. It should be added that it also forces motor companies to diversify into new areas, such as vehicle leasing, where operating margins are relatively luxurious. That, too, has to be beneficial for shareholder value and for customer choice.
Ford has the strongest balance sheet of the big players and should prove resilient in the coming fight between the global motor giants. It will be fascinating to see whether Volvo can be enhanced on the Jaguar model, or whether it will disappear into the middle market. On this evidence, I think Ford is too canny to squander its brand image, whatever that may turn out to be.
But one other matter does exercise me. With the diversity of marques that are now collected in the Ford portfolio, from Aston Martin to Mazda, is it possible, as the company progresses, that one day Ford may not actually manufacture any cars called Ford? For a family that still owns 40 per cent of the company, that would be a turn up.