Archive : At Jaguar, Spit and Polish for the Balance Sheet

Published: Tuesday, December 13, 1994

They were madly painting and polishing at the Jaguar Cars plant here one recent day, making the place sparkle for a visit from a loyal customer, Queen Elizabeth II.

But the changes at Jaguar of late have been more than cosmetic. After nearly five years in which it has posted nothing but operating losses — and made its parent company, the Ford Motor Company, look foolish for having paid $2.5 billion to acquire it in 1989 — Jaguar appears on track to reap something more than a visit from the Queen: a profit.

The turnaround has not come easily. The inefficiency and sloppiness of Jaguar’s manufacturing were far worse than Ford had expected when it bought the company, and the amount of money and time needed to set things right far greater.

Ford has sunk more than $4 billion into Jaguar, including the purchase price, accumulated losses of more than $1.2 billion, capital injections and a $320 million investment in a newly introduced update of its XJ sedan, the backbone of Jaguar’s product line.

The survival plan required wholesale changes in manufacturing and labor relations to cut costs and improve quality that had sunk to abysmal levels. (The favorite bumper sticker of disgruntled Jaguar owners: “The parts falling from this car are of the finest British craftsmanship.”)

Despite slashing 6,000 jobs from its work force of 12,700 during the last four years, Jaguar will have a struggle convincing Ford that Britain is the most efficient place in which to build the next generation Jaguar, a higher volume, less expensive sedan expected to go into production by the end of the decade. But the progress so far has provided a clear shot at long-term survival for the luxury-car maker, which company executives say is Britain’s largest single exporter.

Barring some unexpected foul-up, Jaguar should post a profit in the three months ending on Dec. 31, its first positive quarterly result in more than four years, following the economic recoveries in Britain and the United States and the introduction this fall of the restyled XJ sedan.

Sales next year are projected to exceed 38,000, up from about 31,000 this year and 28,000 last year, but well below the peak of 49,500 in 1988. Analysts are expecting a modest profit next year, though it remains unclear how Ford will recoup its investment.

“We’ve come an awful long way,” said Nicholas V. Scheele, a Ford executive who is chairman of Jaguar. “We’re not on track until we’re showing black numbers at the end of a full year. But clearly the path is looking easier now than it was two years ago.”

Ford’s strategy has been to retain as much of the Jaguar heritage and mystique as possible, but to impose Ford’s expertise in manufacturing efficiency, quality control and information management on a company that had come to represent all that went wrong with British industry.

“We drove in systems and procedures that had been proven throughout the world by the Ford Motor Company,” said David Hudson, Jaguar’s plant director. “Since the acquisition, in terms of manufacturing, we’ve been through a revolution.”

The revolution was built on the same tactics used by automotive companies worldwide: investing in more efficient machinery, and pushing more responsibility down to the workers on the production line.

Before the acquisition by Ford, Jaguar had been a bastion of hard-core unions whose members worked to strict rules on what they would and would not do, and when. Work stoppages cost the plant a half day of working time a week.

“The relationship between management and the trade unions has not historically been, shall we say, best in class,” Mr. Hudson said.

Ford negotiated a complete overhaul of the relationship, throwing out most of the old work rules and giving workers far more say in the way the cars were built. The old quality system, in which work was checked by inspectors, was scrapped in favor of a system in which workers signed off on each task and were encouraged to point out problems.

There are still some labor problems. Workers have been balking at management’s plan to impose voluntary overtime, for example. But there has been only one work stoppage since 1990.

“Since the change, the lads are more committed to their jobs,” said Dave Allen, a team leader. “If you’re picking up faults and someone is listening to you, it’s worthwhile.”

To some extent, the work force has been motivated by the knowledge that the proposed smaller car — considered by analysts to be the most important project at Jaguar in decades — could well be built in the United States, Europe or even Japan.

Ford is not yet close to a decision on where to build the car or even whether to build it. But in Coventry, the work force and managers are aware that competitors, including Mercedes-Benz and BMW are preparing to build cars in the United States. Ford is even reportedly considering building the new Jaguar at a Mazda plant in Japan.

“You could build a Jaguar in many places around the world,” Mr. Scheele said. “All of us recognize reality. The world does not owe us a living and Ford does not owe us investment.”

So far, the signs at Coventry are encouraging. The number of employee hours needed to produce one car has been slashed in half in the last five years, to about 100. That is about five times that of a Toyota, but Jaguar does things like woodwork by hand.

Perhaps most important, the product itself — Jaguar makes the XJ sedan series and the XJS sports car — shows every sign of being much improved. Traditional problems areas like Jaguar’s electronics have received special attention, including more sophisticated testing.

As a result, Jaguar’s standing in the customer satisfaction survey conducted in the United States by J. D. Power & Associates, the consulting firm, has risen sharply during the last few years.

Jaguar now ranks 10th in the J. D. Power study, which measures consumers’ satisfaction with product quality and dealer service after one year of ownership, up from 25th a few years ago. With a score of 143 in the 1994 survey compared with an industry average of 135, Jaguar still lags well behind Lexus, which had a score of 176, but ahead of Mercedes, at 141, and BMW at 138.

For now, Jaguar’s performance rests with the updated XJ sedan series, which starts at about $53,000. It has been given a more rounded style, reminiscent of the Jaguars of old, and many of its systems have been completely overhauled.

“The changes they’ve made are just what they needed as a kind of holding action until they can introduce a new, smaller Jaguar that can be built in higher volume,” said Karl Ludvigsen, an auto industry consultant in London.

Keith Adams
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