Crushed under the weight of car giants

Family life is not always easy. Loss-making car marques Jaguar and Saab are causing severe headaches for their respective parents Ford and General Motors (GM).

The US corporations bought the luxury car brands believing that their corporate scale would bring efficiencies to their production and marketing operations. But in the process, the auto giants have undermined the individuality of these niche brands and alienated their traditional customers.

Last week’s announcement by Ford that it will make deep cutbacks at its UK Jaguar operations looks to some like a recipe for the brand’s demise. The US giant’s plans for Jaguar led one union leader to warn that the company would “kill off” the brand.

The announcement spells the end of Jaguar car production at the marque’s spiritual home, the historic Browns Lane factory in Coventry, though the plant will continue to make wood finishes for the cars’ interiors. Assembly of Jaguars will move to the Castle Bromwich plant and there will be 400 redundancies at Browns Lane. A further 750 jobs will go when Jaguar’s back-office operations are combined with Land Rover’s.

Jaguar’s marketing will take a new direction. The company plans to sell its disastrous Formula One team at the end of the season, and Jaguar marketers are awaiting news of their fate. Jaguar has pledged to reveal a new design direction and “refocus marketing on the unique brand proposition of its vehicles as beautiful, fast cars”.

Chris Wood, chief executive of branding agency Corporate Edge, who owns an E-type Jag himself, is disappointed with Jaguar’s recent designs: “The cars used to be sexy, they have simply lost it,” he says.

Jaguar has seen demand drop in the US largely due to exchange rate fluctuations and competition from Mercedes and BMW, and Ford has been wanting to reduce costs. The marque, bought by Ford in 1989, was largely responsible for the $362m (&£203m) its premier car division lost in the second quarter.

Jaguar sales nearly tripled from 50,000 to 130,000 between 1998 and the end of 2001 but they then began to dip, and in 2002 sales slipped back to 120,000. The huge rise has been criticised for being built on the back of downmarket model launches that have damaged Jaguar’s luxury brand values without producing the long-term sales uplift that was intended.

While both Jaguar and Saab are staging a recovery in the UK, and are the only two premium marques to show an increase in sales (up 29 and 33 per cent in August respectively), globally they are dwarfed by German rivals Audi, BMW and Mercedes. Worldwide, Saab sold just under 134,000 cars last year and Jaguar just 122,000; Mercedes and BMW sold over a million each.

Global Insight automotive analyst Vik Barodia says: “In both Saab and Jaguar’s case, the products have got better, even more so in the case of Jaguar. But GM and Ford have not found Saab and Jaguar to be the cash cows they hoped they would be. They are discovering that maintaining their particularity comes at a price.”

Cost-cutting measures, such as sharing platforms and engines with humdrum sister marques at Ford and GM, have led some people to suggest that models launched by the new owners are not “real” Saabs or Jaguars.

Volkswagen pioneered component-sharing between different marques a decade ago. But it now faces the problem that consumers know they can buy the qualities of a Golf or Polo for less money if the car is a Skoda or Seat, the two value marques in Volkswagen’s portfolio. Corporate Edge’s Wood says: “There are big dangers with component-sharing. The population is more marketing literate and able to interrogate a brand’s authenticity.”

The mismatch between GM’s mass-market orientation and the niche brand values of Saab were starkly underscored by a comment made by Bob Lutz, the charismatic and outspoken vice-chairman of General Motors. “Saabs,” he said, “were owned by professors with pipes and tweed jackets with suede leather elbow patches, and the reason they bought them was that they were cars produced by aircraft engineers. There are not enough professors like that to keep it going as a car company.”

Saab insiders felt this summed up GM’s inability to understand the brand’s appeal and its customers. They also believe that the decision to move Saab’s design headquarters out of Sweden to Germany will undermine an essential part of its Swedish heritage.

Former Ford of Europe vice-president Karl Ludvigsen says: “Bob should keep his trap shut, he is really hurting his brands.”

Brand advocates have been horrified by GM’s solution to gaps in Saab’s range for its main market – the US. Saab badges have been slapped on the front of the re-engineered Subaru Impreza to create the 9-2 (christened by wags as Saaburu). Saab is hoping its enthusiasts will be better pleased with the quirky station wagon-style SportsHatch, which will launch next year.

Jaguar’s X-type, launched in 2001, has also been a disappointment. Based on underpinnings from the Ford Mondeo, it was launched to compete against BMW’s all-conquering 3 series with the intention of attracting younger drivers to the brand. However, all that happened was that Jaguar’s elderly customers downsized to the cheaper car, and the perception that the Jag is an old man’s car have not been shifted.

Ludvigsen says he recently counselled Jaguar: “You can sell an old man a young man’s car, but not the other way round.” He believes Ford has been too tentative with Jaguar’s styling.

Being part of a multinational giant means marketers are constrained by the global advertising alignments of the marque’s parent company. Saab’s main agency is Interpublic’s Lowe, and Jaguar’s is WPP Group’s Rainey Kelly Campbell Roalfe/Y&R.

Jaguar, argues Leagas Delaney chairman Tim Delaney, is a brand that needs passion, care and feeling, and it doesn’t receive any of these from Ford and its corporate alliances. “It is stuck in the vast conglomerate of Ford, and its advertising is similarly stuck in the vast conglomerate of WPP,” he says.

Saab has loosened Lowe’s grip on its business and – while it remains lead agency – Leagas Delaney, Saab’s local agency in Italy, has just won the brief to create the European advertising for Saab’s new diesel 9-3 (MW last week).

However, the new Saab diesel engines are sourced from Fiat Auto’s Alfa Romeo, in which GM has a 20 per cent stake, underlining the very problem of specialist cars maintaining their niche quality when housed with more mainstream brands.

Likewise, Jaguar’s plans for new diesel engines and the launch of an estate model in the US don’t have much resonance with its core brand values.

The challenge of maintaining individuality for Saab and Jaguar is likely to result in many tussles between marketers, accountants and the brands’ passionate adherents for some time to come.