Faced with mounting losses across all of its operations, carmaker Ford has been forced to admit that Jaguar – one of its prestige marques, and certainly among Britain’s best-loved brands – has been a failure, and is likely to be sold. What went wrong? By Robert Lester
Ford’s decision to embark on a “strategic review” of its business has thrown the future of Jaguar, one of Britain’s best-loved brands, into doubt. The US car giant has appointed former Wall Street investment banker Kenneth Leet to assess and value all of its marques – a move that could lead to the sale of legendary but loss-making Jaguar, owned by Ford since 1989.
Ford paid &£1.6bn for Jaguar but has made heavy losses on its investment. Last year the troubled Detroit carmaker was forced to pump a further &£1.2bn into the company to keep it afloat. Its total investment is thought to be almost &£4bn, but Jaguar is still one of Ford’s poorest performing divisions and was responsible for much of the $162m (&£85m) second-quarter loss at its Premier Automotive Group, which also includes Aston Martin, Land Rover and Volvo.
News of the shortfall followed admissions by Ford that losses across the group for the second quarter were more than double the figure announced last month. The company, which is closing 14 plants and cutting 30,000 jobs, revealed it had made a loss of $254m (&£133m) in the second quarter, compared with its original calculation of $123m (&£64.5m).
Ford’s chairman and chief executive Bill Ford Jr says no decisions on disposals have been made, but Leet’s expertise is in mergers and acquisitions. Ford could choose to retain Jaguar, cut back on production and turn it into a specialist luxury saloon and sports carmaker like Aston Martin, but most observers think it will be sold.
One possibility would be to package Jaguar with Land Rover to sweeten the deal for potential buyers. The two marques already have strong management links with the companies sharing senior executives and, following substantial restructuring and heavy investment in new models, Land Rover is experiencing strong sales and making money.
Other reports suggest Ford could sell majority stakes in both brands, while retaining a minority interest in each.
Ford is understood to have held exploratory talks about Jaguar with Renault, the French car group run by Carlos Ghosn, and Hyundai, the Korean carmaker with global ambitions.
Russian oligarch Oleg Deripaska, who bought Birmingham van company LDV for &£50m last month, is also said to be interested. He has teamed up with former head of Ford of Europe and Maserati Martin Leach (MW last week), who has been appointed general director of the international division of Gaz, Deripaska’s commercial vehicles empire.
Chris Wood, chairman of branding consultancy Corporate Edge, thinks Ford’s wider problems mean a sale of Jaguar is on the cards. “If it was ten years ago, Ford would have just put its hands in its pockets and got on with it,” he says. “But Ford has got an awful lot of problems and Jaguar is just one. If you have got bits of the business that are doing well you can borrow from Peter to pay Paul, but when you have problems on all fronts sometimes you don’t have that luxury.”
As a one-model brand with only the XJ prestige sports saloon in 1994, Jaguar sold 6,594 cars globally. Ford raised production and in 1995 global sales jumped to 33,465. By 2000, it was selling 90,000 cars around the world thanks to the launch of the XK in 1996 and the S-Type in 1999. In 2002, global sales stood at 130,330 after the launch of the mass-market X-Type, but the car was criticised for diluting the brand’s prestige following unfavourable comparisons with the Ford Mondeo.
Wood adds: “The accountants sat down and said that to make a company of that size viable it needed to have an entry-level model. But the consumer saw it coming.”
Jaguar has also suffered from reliability problems and was almost the last executive carmaker to introduce diesel engines, the fastest-growing sector in the market. In 2004, its global sales fell to 119,000; last year it sold about 90,000 cars and in 2006 that is likely to fall again to 85,000 – a far cry from the 200,000 production level talked about when the X-Type was launched.
Jaguar is now planning to axe the X-Type in the US, as exclusively revealed by Marketing Week earlier this year (MW January 12).
Jaguar’s director of corporate and governmental affairs Don Hume says the X-Type has been a success for the company, doubling its sales and attracting new customers to the brand. But he admits a “smaller, more focused Jaguar” is the model of the future.
“The history of our company is based on the fact that people buy cars for emotional reasons but over the past five years we have perhaps forgotten that to some extent,” adds Hume. “Now we are moving to bring back that emotion, along with the glamour and sophistication that make Jaguar a unique brand.”
Recapturing lost youth
At the end of last year, the company launched an advertising campaign featuring the strapline “Gorgeous” to remind people that Jaguar is a luxury brand. It has also loaned its new XK sports car to ten “brand ambassadors”, including fashion designer Carlo Brandelli, who was recently voted Britain’s most stylish man.
But one of the most pressing problems Jaguar faces is that it is now seen as an old-fashioned brand. Dan Holliday, director of brand communications agency The Fish Can Sing, says: “Quite simply, Jaguar has lost its cool. Where once it was the racing green dream of millions of British men, they’re now more likely to hanker after a Mercedes, BMW or Porsche.”
Holliday adds: “From the 1980s onwards, Jaguar came to be seen as an old man’s car, the vehicle of choice for portly Northern industrialists and their gaudy wives or spivvy London entrepreneurs. When I see an XK in a Kanye West video or a fleet of Jaguars in Manchester United’s car park I’ll know the brand is back. We need to see young people driving them.”
It seems that potential buyers must be prepared to invest time and money in a reinvention of Jaguar if it is to rediscover its glory days. But there are many who still believe that the brand is strong enough to bounce back.
Steve Pople, group account director for General Motors at media agency Initiative, says: “If you get the right people on board and bring out relevant products that redefine what Jaguar is about then it can be a success. Jaguar is about style, design and performance in a way that’s affordable, but it remains to be seen whether it will ever be able to recreate what people have in their heads as a classic Jaguar.”