Ford and Jaguar’s disastrous 18-year marriage is about to end in divorce but the once desirable British marque has found itself conspicuously short of new suitors. With almost every major car manufacturer apparently ruling itself out of the running, an increasingly large question mark hangs over the future of the famous Big Cat.
Ford confirmed last week that it had appointed Goldman Sachs, Morgan Stanley and HSBC as financial advisers to “determine the best future” for Jaguar and sister marque Land Rover. The disposal has been codenamed “Project Swift”, suggesting Ford wants a quick deal, and industry sources claim a sale could be agreed within six weeks.
But Hyundai, Peugeot-Citroën, RenaultNissan and Fiat have all reportedly distanced themselves from making a bid, leaving private equity players such as One Equity, Alchemy and Cerberus, which bought 80% of Chrysler last month, as the frontrunners.
Director of the Institute of Automotive Industry Research, Professor Garel Rhys, says: “The Chrysler sale has opened up new possibilities. For the first time, private equity companies are looking at the car market seriously. There is so much money in the private equity sector now and what wasn’t worth bothering with before because the returns were relatively low suddenly becomes much more attractive.”
Private equity and the car market
News of the Jaguar and Land Rover sale comes only three months after Ford sold Aston Martin to a venture capital consortium for £450m in an attempt to restore the Ford group to profitability. Ford lost $12.7bn (£6.3bn) last year and the Premier Automotive Group – which was made up of Aston Martin, Jaguar, Land Rover and Volvo – saw losses more than treble last year to $327m (£164.4m) from $89m (£44.7m) in 2005.
But while the Aston Martin sale was broadly welcomed by the car industry because the consortium was headed by automotive entrepreneur David Richards, experts are not convinced private equity is the answer for Jaguar. Chris Wood, chairman of branding agency Corporate Edge, says: “It is almost precisely what Jaguar doesn’t need. It doesn’t need short-term stripping of cash and then to be sold in five years – it needs a ten-year strategy.”
Ford paid £1.6bn for Jaguar in 1989 and £1.8bn for Land Rover in 2000. Analysts predict it will want between £3bn and £4bn for the two marques – which will almost certainly be sold together – despite investing billions of pounds to improve their fortunes. Land Rover is profitable and in reasonable shape but Jaguar’s woes have continued. Ford tried to ramp up production and turn the iconic British marque into a mass-market producer but between 2005 and 2006 output across Jaguar’s four models fell from 84,000 to 75,000. Take out the addition of the 13,000 XK cars, which only began production last year, and like-for-like production fell more than 25% in 12 months – a far cry from Ford’s ambition of making 500,000 cars a year.
A new owner could be a fresh start for Jaguar, according to UK managing director of global motoring consultancy Courland Automotive Practice Guy Masters. “It’s probably good news for Jaguar because Ford always struggled to get their head around what to do with the brand,” he says. “The problem that Jaguar has had in recent years is that there has been a lack of clarity about what the brand stands for. If there hadn’t been that lack of clarity they perhaps wouldn’t have made decisions like the X-Type and the S-Type.”
Gorgeous or not?
Euro RSCG Fuel was appointed to handle Jaguar’s $100m (£50m) global advertising account in 2005 and created a campaign featuring the strapline “Gorgeous” to remind people of its luxury credentials. Euro RSCG UK group chairman Kate Robertson believes the Gorgeous work marked a “turning point” for Jaguar, saying campaigns from rivals such as BMW and Audi have been influenced by Fuel’s advertising for Jaguar.
She adds: “When we won the business our view was that it’s not so much about niche but it’s absolutely about luxury. Luxury today doesn’t have to be niche. Real luxury brands like Karl Lagerfeld can go from Chanel to H&M without any problem. We felt Jaguar had lost its luxury brand status completely.”
But Mike Moran, co-founder of motoring consultancy The Automotive Partnership, thinks the first thing the new owners should do is review the advertising account. “The Gorgeous campaign is anything but gorgeous – it’s rubbish. It’s not building a brand – it’s creating a bit of a laughing stock at a time when some of the products are very good. It takes a long while to destroy a strong brand but once you have lost it it’s very hard to get it back.”
A senior advertising industry source believes the blame lies with the parent company, adding: “It was Ford that ruined Jaguar. It is rubbish at marketing luxury cars.”
One former Jaguar insider argues that it is the design of the cars, rather than the brand, that the marque’s new owners need to focus on. “Jaguar is extraordinarily well regarded by consumers,” says the source. “The problem is that Ford kept it elastic and never allowed the brand to break free. It was so far ahead of anyone else in the old days but it bumbled along reproducing retro vehicles. The issue with Jaguar is very simple: the lack of sales success is down to the fact that the thing looks 100 years old – it’s not because people don’t like the brand.”
The irony for Ford is that it seems to have learnt its lesson after the criticism of the S-Type and the X-Type. The new XK sports car has been well received and the S-Type replacement, the XF, has also enjoyed favourable reviews, leading many to claim that the company is finally turning the corner. But with the car industry squarely in the firing line when it comes to climate change, the success of both brands – particularly Land Rover – is likely to depend on substantial investment in lower emission vehicles.
Last week, Britain’s biggest union Unite called for government intervention to prevent private equity taking over the two brands, saying asset-stripping could lead to factory closures and huge job losses. But director of brand consultancy Brand Forensics Jonathan Gabay says: “I think it’s important that whoever buys it keeps production in the UK. From a brand perception point of view that gives it more authenticity. It’s particularly important to the Americans that it’s truly British. They have to keep that Britishness or it will start to lose its cachet.”
Ford has finally run out of patience with Jaguar and is selling it, along with Land Rover, in a bid to save its own skin. While it seems almost certain that Ford will make the best decision for itself rather than Jaguar, the sale will give the British luxury marque one more chance to get it right. But the Big Cat must have exhausted its nine lives and its survival rests on this deal.