Ian Nicholls, AROnline‘s historian, turns his attention to Jaguar – and looks at its fall and rise in the 1990s, an era when the German manufacturers were beginning to take over the world.
Here, in Part One, he delves into the process that led to Ford buying this most British of carmakers.
Maintaining The Myth
Jaguar is seen as the epitome of a British luxury car, wood trim and leather upholstery combined with quality engineering to produce class and refinement that left its rivals, many retailing at a higher price, trailing in its wake.
That was certainly true of the 1968 Jaguar XJ6, which was acclaimed as the best car in the world regardless of price. However, the story of Jaguar since its founder Sir William Lyons retired in May 1972 has been rocky to say the least.
The clichéd story of Jaguar Cars since 1972 pedalled by so many historians is that it was absorbed into the vast British Leyland abyss, infected by industrial action, and a lack of quality control and came close to closure. Then, in 1980 John Egan (centre, below) took over, tackled the quality issues and turned the company around. Jaguar was privatised and launched the brilliant XJ40 saloon, which prompted sales to rocket even further – and, of course, none of Jaguar’s problems in this period were the company’s own fault.
During the 1980s Jaguar’s Public Relations Department was very effective in convincing the world at large that it was a major British industrial success story, whilst its former partners in British Leyland, Austin Rover, seemed to be a hopeless and inept basket case.
Most detailed histories tend to stop in 1986 with the launch of the XJ40. By then, all the old guard of Jaguar’s Design Team, the men who created the 1968 XJ6, had retired, leaving the company’s future with a new generation. But what happened next?
Jaguar finds its own feet in the private sector
By March 1988, Jaguar Cars was no longer purring along an open road, powered by the twin engines of a weak pound and a strong American economy. After rising from £10 million to £121 million between 1982 and 1986, profits went £24 million into reverse at £97 million in 1987. The October 1987 stock market crash had dented American sales, but Jaguar sought to redirect production to other markets to compensate. At that time Jaguar productivity was only four cars per worker compared with Mercedes six.
In May 1988, Jaguar Cars officially opened its new £55 million Design and Engineering Centre at Whitley, on the outskirts of Coventry. The new centre employed 1400 engineers and hourly-paid support staff, and replaced a tumbledown series of shacks and lean-tos at the Browns Lane assembly factory a couple of miles away.
Until then, Jaguar styling bucks had to be viewed in the open air in the grounds of the Browns Lane complex. This was certainly the case with the XJ40. By August 1988, when Jaguar announced its half-year results, things were beginning to look a lot less rosy. Profits for the first six months of 1988 were virtually halved and Chairman Sir John Egan warned that the full-year figures would be significantly down.
Jaguar had not been thought of as particularly vulnerable in the wake of the 1987 Wall Street Crash, as its cars were aimed more at the Chief Executive type than the red-braced stockbrokers.
At the end of 1987, when the dollar began to fall and Porsche was forced to raise prices, Jaguar looked to be doing well. However, as the pound strengthened in the first half of 1988, sales in the USA became less profitable. At the same time, Americans were shell-shocked and picky about their consumer spending habits. A strong pound had knocked £30 million off Jaguar’s half-year figures.
Jaguar starts to lose money
Every cent the dollar lost against the pound was now costing Jaguar a staggering £3 million. At the same time, industrial relations at Jaguar seemed to be going awry with niggling disputes with its workforce, who also happened to be shareholders. It was not helped by the company’s announcement that, at some point in the future, it intended to reduce its labour force by 1200 in order to raise productivity to Mercedes’ standards.
By 1989, Jaguar had hit a three-year run of falling profits, due to a weak dollar, growing competition, labour unrest and falling American sales. Jaguar’s troubles piled up in January 1989 when Toyota launched its new luxury model in the USA, Lexus, at prices one-third less than its European competitors and Sir John Egan announced that Jaguar’s crucial American sales were down almost 10 per cent at 20,727 cars in 1988.
Sir John Egan announced in September 1989 that Jaguar profits had slumped from £22.5 million to £1.4 million. This dramatic fall in profits was the worst since Jaguar had been privatised in 1984.
Now the predators were gathering to bid for Jaguar, waiting for the Government’s Golden Share in the company, designed to ward off hostile bids, to expire at the end of 1990. Among the predators were the American giants, Ford and General Motors.
Cash-rich Ford had a secret task force called ‘Columbus 2’ devoted to planning a takeover bid in the near future while General Motors had said that Ford would get Jaguar ‘over our dead body.’
Ford and GM fight for Jaguar
Later in the month, Ford had revealed that it was buying Jaguar shares. At a news conference, Lindsey Halstead, the Chairman of Ford of Europe, said he had informed Sir John Egan that Ford was interested in buying up to 15 per cent of Jaguar’s shares initially – the maximum the Government would permit until the end of the 1990. He termed the conversation ‘very friendly’ and said ‘I would hope to have more’ talks.
Lindsey Halstead indicated that Ford would ultimately like to acquire a controlling stake in Jaguar to help bolster its sales in the luxury car market. ‘We’d like to participate more significantly in that segment,’ he said.
Sir John Egan was quoted as saying: ‘Our desire has always been to maintain the independence of the company.’ Also, ‘I believe it’s in the best interests of the shareholders, the customers and the employees to remain an independent company, particularly when you remember that BL couldn’t give it away in 1980. Even though the Ford move came as an unwelcome surprise, I suppose it is a bit flattering to think that we have created something worthwhile with good products, good dealers and good customers that so many very much larger companies now appear to want.’
‘I suppose it is flattering to think that we have created something worthwhile that so many very much larger companies now appear to want.’
– Sir John Egan
The expression of interest by Ford sent the value of Jaguar souring above the £1 billion mark on the stock market. Then, in early October 1989, the General Motors Corporation said that it might buy a minority interest in Jaguar Cars and was discussing manufacturing and marketing joint ventures with the British car maker.
This was a reference to the XJ80, a smaller saloon which was to have been produced at Opel’s Russelsheim plant in Germany. The project also known as the ‘Jersey Junior’ would have used an Opel floorpan. GM said the negotiations with Jaguar ‘have been conducted for several months.’ In its statement, GM took pains to align itself with Jaguar’s management. ’GM is discussing the possibility of acquiring a minority interest in Jaguar PLC to assist Jaguar in remaining an independent British-owned automobile manufacturer,’ the company said.
Ford wins the battle…
A few days later Jaguar announced a new 4.0-litre version of the XJ40 saloon (above), which replaced the 3.6 litre variant.
Then, on 1 November, Nicholas Ridley, the Secretary of State for Trade and Industry, said the Government was willing to lift a restriction barring anyone from buying more than 15 per cent of Jaguar’s shares until the end of 1990. The price of Jaguar’s shares on the London Stock Exchange soared in response. The announcement paved the way for an all-out fight between the General Motors Corporation and the Ford Motor Company for Jaguar. Ford had now bought 13.2 per cent of Jaguar’s shares.
Sir John Egan, Jaguar’s Chairman, said: ‘We were not consulted in the matter in advance and were surprised at the action taken.’
The following day the Ford Motor Company announced that it planned to buy Jaguar Cars. After the Ford announcement, General Motors declined to enter the bidding and took the unusual step of publicly stating that Ford’s bid price, ‘could not be justified.’
GM said in a statement: ‘After an intensive review of Jaguar’s products and plants and in view of the losses currently being sustained by them, together with Jaguar’s significant future cash and other requirements, GM concluded that the maximum value that could be assigned to all of the Jaguar shares was very significantly below the $8.50 being offered… The premium of approximately $1.3 billion ($2 billion) over book value at year end 1988 could not be justified.’
Ford’s bid of $13.32 a share was nearly twice what Jaguar’s market value was before Ford announced its intent to buy control of the company in mid-September 1989.
…but at a price
Ford executives made it clear that they were paying a premium for the Jaguar name and would invest heavily to turn the British company into a much bigger producer. ’One of our first tasks will be to discuss with Jaguar management its plans for future model development and the actions necessary to expand its manufacturing and product development resources. Our intention would be to increase Jaguar’s sales volume,’ said Lindsey Halstead, Chairman of Ford of Europe, at a news conference.
Sitting next to Lindsey Halstead (right) at the news conference, was a subdued Sir John Egan, now resigned to the Ford takeover. The Jaguar Chairman, said GM had known that Jaguar expected Ford to make an offer for the company. But he added that Jaguar did not inform GM of Ford’s bid, and thus did not give it a chance to top the offer before accepting it.
Sir John Egan stressed that Ford had promised Jaguar considerable autonomy. Under the agreement, Jaguar’s headquarters and manufacturing operations would remain in the West Midlands, it would have its own board, and it would maintain a separate dealer network. Lindsey Halstead was evasive when asked about the possibility of making Jaguar cars outside Britain; he did not rule it out, but reiterated his commitment to British production.
So what was the mighty Ford Motor Company buying?
In 1989, Jaguar produced 32,833 XJ40s and 10,665 XJ-Ss. The company had blamed the strength of Sterling for the decline in XJ40 sales, they had peaked in 1988 at 39,432, but there were other reasons. The rival Lexus rapidly became the best-selling luxury car in the crucial North American market, and this was not just because it was cheaper, it was also better built and its 4 litre V8 engine was more refined than the AJ6 unit in the XJ40. The Lexus had redefined what was possible in a luxury car.
Despite all the publicity given to the model’s extensive testing, XJ40s built in 1986 and 1987 suffered from electrical, steering and suspension problems, which were to seriously tarnish the model’s reputation. In 1985, long-serving Jaguar test driver Norman Dewis was the lone voice among Jaguar’s technical staff in telling Sir John Egan that the XJ40 was not ready for launch in 1986. His comments were ignored and he retired shortly thereafter.
And to re-enforce the argument that the XJ40 was not good enough and that blaming the strength of Sterling was a partial smokescreen was the other Jaguar car on sale, the XJ-S.
From being an ugly duckling in 1975 the Jaguar XJ-S (above) had matured into an elegant swan with 1989 being its most successful year with 10,665 being manufactured. The once controversial styling, devised by aerodynamicist Malcolm Sayer, improved with age, as the use of wind-cheating designs filtered into mainstream family cars as a result of the energy crisis. It was a tried and tested product now available in a wide variety, V12, inline six cylinder, coupe and convertible.
Its early niggles had been ironed out and it was now comfortably fulfilling its intended role as a profitable GT car. Unlike the earlier E-type, the XJ-S was eminently adaptable in meeting changing customer needs. In 1989, the XJ-S had positive brand values while the XJ40 was doing the opposite for Jaguar.
Why was this so? Well, one can surmise that the XJ40, as Norman Dewis had predicted, had been announced before it was ready. The car had been developed by a team of around 300 people, which by the 1980s was miniscule. The original XJ6 had been developed by an even smaller team and Jaguar had deluded themselves then that they had got away with it.
All based on Egan’s recovery of Jaguar
The XJ6 had, of course, suffered from quality problems, but in the Jaguar myth this was attributed to the Series 2 era and British Leyland, while the then Managing Director, Geoffrey Robinson, was accused of putting quantity ahead of quality, though quite how this was done has never been spelt out. By the time the Series 2 XJ came along the Browns Lane paint plant was clapped out, and the media commented how inferior the paint finish on a new Jaguar was in comparison to rival manufacturers.
An example of poor Jaguar quality in design is this: when the fuel-injected V12 had been introduced in May 1975, the electronic ignition module had been sited in the vee of the block – the hottest part of the engine. In the important American market, in the summer heat, XJ12s and XJ-Ss began cutting out without warning. This could not be laid at the door of British Leyland, this was down to Jaguar itself.
American customers knew all about poor Jaguar quality long before the formation of British Leyland and it acted as a brake on production. The official line was that production was closely related to orders, but if the demand for 40,000 plus cars had been there, then Jaguar had the capacity to make them.
When John Egan took the helm he borrowed an idea from Mercedes-Benz and had bought in components tested for durability. If the components were faulty the suppliers were brought to task. In this way, the now ageing Jaguar range had been knocked into shape and turned into reliable motor cars. Gradually, with the passage of time, all the flaws in the Series 3 XJ and XJ-S were resolved. There was no such luck with the relatively new XJ40. It may have been a better car than the Series 3 XJ6, but it was not as reliable.
Mechanically the Series 3 XJ6 was relatively simple with electric windows and a sunroof as the only complications. The XJ40 had ABS and warning lights that seemed to light up at random for no reason at all.
Anyway, apart from the XJ40, XJ-S and the low-volume Daimler Limousine, what else was Ford buying? There was the assembly plant at Browns Lane and the former Daimler factory at Radford, which made engines, plus the Design and Engineering Centre at Whitley.
Cars in Jaguar’s pipeline when Ford took over
In the pipeline were the XJ41/42 (above), XJ80, XJ81 and XJ90 – all at various stages of development. The XJ41/42 was an XJ-S replacement, which had been ongoing since 1980. Sir John Egan had publicly announced it in June 1987 as the F-Type and said it was due for launch in 1990.
XJ80, as mentioned earlier, was a smaller saloon to be built in Germany by Opel. It appears to have been nothing more than a paper exercise, and the Ford takeover meant instant consignment to the waste paper basket.
The XJ81 was the V12 version of the XJ40. The extent of Jaguar’s intolerance towards the idea of component sharing, lest it corrupted the purity of the breed, with other divisions of British Leyland was revealed by the design of the XJ40’s engine bay, which was allegedly designed to be too narrow to take the Rover V8 engine. This also meant it was too narrow to take Jaguar’s own V12 engine.
By the time the XJ40 reached the market, Jaguar’s teutonic rivals were also introducing V12 engined saloons so, instead of phasing out the Series 3 altogether, the XJ12 was kept in production while Jaguar tried to retro-fit the V12 to the XJ40.
The XJ90 (below) was the replacement for the XJ40 and got as far as the clay model stage. It marked a return to the curves of the Series 3 after the more angular XJ40. Although the XJ40 has received criticism for its looks, mostly from traditionalists, it did update the Jaguar saloon look and it was with the approval of company founder Sir William Lyons, who lived long enough to see the final design and was regularly consulted over its appearance.
Jaguar executive Mike Beasley later said: ‘The issue for Jaguar in the late 1980s was not just: “How could we refresh our products?” The issue was: “How could we afford to refresh our products?”‘