Archive : Jaguar Battle at a Turning Point


The new leaders of Jaguar Cars Ltd. are hoping that their first major victories are at hand in the battle to turn the antiquated British company into one of the world’s biggest, most efficient makers of luxury cars.

Early this week, the company’s 9,000 production workers are expected to vote on labor contracts that would do away with practices that are ancient history at most other car companies. Management seems confident that a generous pay offer will persuade workers to accept the contracts and has hinted that the factories could be closed and Jaguars built elsewhere if they do not.

At the same time, Jaguar’s new owner, the Ford Motor Company, will be considering a plan intended to more than triple the number of cars that Jaguar sells within a decade. The plan is not cheap, calling for spending $:1 billion ($1.95 billion) over the next five years, and Ford expects Jaguar to generate or borrow the money. Expecting $100 Million Loss

That seems like a tall order for a company that had a pretax loss last year of $79.2 million on sales of $1.83 billion and that could lose as much as $100 million this year. And the internal expectation is that Jaguar’s cash flow will not turn positive before some time in 1992.

But by then, Jaguar’s leaders hope, the manufacturing whizzes that Ford has installed at Jaguar will have slashed production and purchasing costs; the prices on Jaguar cars, now a relative bargain, will be more in line with those charged for competitors like Germany’s BMW and Mercedes-Benz, and the depressed market for luxury cars will have begun to recover. Besides, they say, the heavy spending will not start until then.

It is much too early to say whether Ford executives were fools or gutsy visionaries when they decided to pay $2.5 billion last year for Jaguar, a company big in name recognition but a pipsqueak in number of cars sold. Analysts remain divided. Task Appears Enormous

Getting new labor contracts and concocting a product plan are one thing. Turning workers from the least to the most productive in the industry and coming out with a new line of cars that will one day sell like BMW and Mercedes-Benz — 500,000 to 600,000 cars a year, each — is quite another.

And the task appears to be even more enormous than Ford thought it would be a year ago, when Jaguar capitulated to its advances.

“It was pretty clear looking from the outside that manufacturing was not Jaguar’s strength,” John A. M. Grant, Jaguar’s deputy chairman and one of three Ford veterans charged with transforming Jaguar, said wryly. “But the extent of the underinvestment was a little bit of a surprise.

“The work practices had actually gone backward” since the British Government turned state-owned Jaguar into an investor-owned company in 1984, he said, adding, “Another area of disappointment was we thought the development of new products was going to be more advanced.” Chairman’s Blunt Assessment

William J. Hayden, Jaguar’s chairman and chief executive, and before that the head of manufacturing at Ford of Europe for 16 years, was even more blunt. After a tour of Jaguar’s factories in the Midlands area of central England following the acquisition, he told Car, a British magazine: “I was appalled. I’ve been to car plants all around the world. Apart from some Russian factories in Gorky, Jaguar’s was the worst I’d ever seen.”

In the past, Jaguar executives had steered public attention to the craftsmen who hand-worked the leather and the burled walnut that have made the Jaguar name synonymous with luxury. They did their best not to talk about things like a quota system that allowed workers to call it quits after producing a certain number of cars even if their shift had not ended, or the lack of quality control.

Just how bad Jaguar’s plants are is apparent in the findings of a study of the auto industry by the Massachusetts Institute of Technology. Jaguar used about 110 hours of labor to weld, paint and assemble a car, while German luxury car makers needed about 80 hours and the Japanese 20 hours. Product Development Poor Jaguar’s product development was not in much better shape. Blunt Cockney that he is, Mr. Hayden pronounced it “out of control.” The program that was the most advanced, to develop a smaller sports car, had begun in 1980; yet, the car was at least four years from market. Jaguar’s new bosses concluded that the car was already outdated: it would have been overweight, underpowered and inadequate in fuel efficiency. They killed it.

This low esteem for Jaguar’s condition helps explain the departure of Sir John Egan in June, three months after Ford made Mr. Hayden chief executive. Sir John, who had headed Jaguar since 1980, had taken great pride in how he had turned Jaguar from a subsidiary of state-owned British Leyland that had lost $112.8 million in his first year into an investor-owned company that made a record $175.2 million in 1985.

The new regime’s 10-year plan calls for a new generation of models to replace Jaguar’s two current lines: the XJ-6 sedan and the XJ-S grand touring car. Although the XJ-6 was largely renewed in 1986, replacing it is the priority. A new XJ-6 would be the first completely new car to come out of Jaguar since the XJ-S was introduced in 1975. Sales Goal for the 90’s

The goal is to have both new models on the market by the mid-1990s, when the plan envisions annual sales reaching 65,000 cars, up from the record 49,494 sold in 1988 and the 44,000 expected this year.

Then in the late 1990’s, Jaguar would add a line of smaller, sportier sedans designed to appeal to the kind of younger buyers who now buy the BMW 5-series but look down their noses at the Granada Scorpio, Ford’s top-of-the-line European car. If all goes as hoped, the 5-Series Competitor, as it has been dubbed internally, will enable Jaguar to increase its sales to more than 150,000 a decade from now.

Mr. Hayden has made it clear that despite its nickname, there would be no confusing its looks. A successor to the Mark II, a curvaceous sedan sold in the 1960’s and early 1970’s that still evokes emotion among car buffs, is “the car we want to build,” he told Autocar & Motor, a British magazine for car enthusiasts. Mr. Hayden, who recently had heart bypass surgery, was not available for interviews. Aiming for Younger Buyers

The average buyer of the XJ6 sedan is 48 years old and makes more than $100,000 a year. The new sedan will be aimed at the somewhat less affluent but rapidly expanding segment of auto buyers who are age 35 to 45. It will probably sell for about the same or a bit less than the BMW 5-series, whose base prices in the United States range from $34,500 to $56,600. The XJ-6’s base price range is $30,425 to $50,425, while the XJ-S’s is $50,425 to $59,425.

Mr. Hayden said Jaguar prices had been too low relative to competitors’ and would rise. An increase would help hasten Jaguar’s return to profitability, but slashing manufacturing and materials costs is much more important.

“I’m pretty optimistic that Hayden will sort that out pretty quickly,” said Daniel T. Jones, European director of the M.I.T. study and a professor at the Cardiff Business School. “Once they have turned manufacturing around and introduced new models, I’m absolutely sure Jaguar will be solidly profitable by the end of the decade.” Investment of Ford Talent

Ford is devoting some of its best talent to fixing Jaguar and plotting its future. Mr. Hayden, 61, turned Ford into the most efficient car maker in Europe. Mr. Grant, 45, was previously executive director of corporate strategy and diversification at Ford headquarters in Dearborn, Mich. And Clive Ennos, formerly executive director of product development at Ford of Britain, joined Jaguar this month as director of product engineering operations.

In an obvious bid not to let Ford hands tamper with Jaguar’s soul, James N. Randle, a longtime Jaguar man, was put in charge of long-term product development. Mr. Ennos, 58, will be responsible for insuring that new models and new versions of existing ones can be manufactured efficiently. Mr. Hayden has also recruited retired Ford manufacturing experts, who are working on six-month contracts.

Jaguar’s leaders believe they can quickly cut materials costs by 8 percent, or $117 million. They have started to take advantage of Ford’s buying muscle to obtain lower prices from suppliers, and they will also buy many small components Jaguar now makes, like screws and shims.

Jaguar’s engine manufacturing needs some modernizing, but its engines — its V12 models and a brand-new 3.2 liter six-cylinder engine — are widely respected. Jaguar can turn to Ford for help in developing high-technology items like anti-lock brakes and air bags. State of the Luxury Car Market

Of course, the dreams for Jaguar also depend on a recovery in the luxury car market. The United States, which accounted for 60 percent of sales a few years ago, now accounts for 40 percent, and a deep recession next year could push American sales down sharply. And thanks to the ailing economy in Britain, Jaguar’s second-largest market, sales were down 23.8 percent in the first nine months of this year.

Jaguar executives are counting on demand rebounding: they think the size of the American and European markets for luxury cars will be about 40 percent and 25 percent bigger, respectively, in 1995 than in 1988, Jaguar’s peak year for sales. They are also working hard to expand in markets like Japan.

But some analysts are not so confident that the luxury car market will revive so quickly. They point out that a growing number of companies, including Japanese concerns, are trying to grab a piece of the market. True, they do not have the Jaguar name. Even so, sales of Toyota Motor’s Lexus and Nissan Motor’s Infiniti luxury models have been steadily growing in the United States.

For its part, Ford shows no regrets about buying Jaguar. “We’re happy we made the purchase,” said L. Lindsey Halstead, chairman of Ford of Europe. “It was a long-term vision. We don’t expect results overnight.

Keith Adams

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