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 Two, he recalls the moment Ford took over and took stock of what it had bought for its £1.6 billion.
The big question is why did Ford buy Jaguar? Senior Ford executive Bill Hayden, who will feature prominently in this story, said: ‘Everybody thought the luxury market was going to boom. At Ford in the USA, people will buy upmarket brands like Lincoln and Mercury. In Europe, Ford didn’t have such a brand. Customers won’t buy a luxury car with a Ford badge on it.’
‘So we looked at Saab for the same reason. We looked at Alfa Romeo. Ford wanted to have a top-end luxury wing. When Lexus came out and Mercedes started to push, they knew they had to do it.’
Ford Vice-President Bruce Blythe said: ‘I knew Ford probably didn’t have enough staying power to build a new brand from scratch. Toyota would never tell you, but I always thought it took five years and $5 billion to create Lexus from scratch. I figured, if you could spend half that much and get a global brand and a global dealer network, I’d rather do that than start from scratch.’
On 8 January 1990 two Ford-nominated Directors were appointed to the Jaguar Board. They were Lindsay Halstead and John Grant. John Grant was previously Executive Director of Corporate Strategy and Diversification at Ford headquarters in Dearborn, Michigan.
The cracks show within days
No public mention was made of the role of Ford production expert Bill Hayden, who was also sent to Jaguar in January. Then, on 22 February, it was announced that Jaguar was recalling 38,315 models, nearly every car it had sold in the USA since the 1988 model year, because of potential brake problems. The recall also affected 56,000 cars sold in other countries.
The recalled cars had a high-pressure hose which could rupture and spew hot brake fluid on the engine, causing smoke, fire and loss of braking power. In the brake recall, all XJ6, Vanden Plas and Majestic cars sold in the United States would be checked for potential leaks. The recall represented the total number of those models sold in the United States in the 1988 and 1989 model years. Jaguar also said it was recalling 38,385 cars sold in the USA dating from the model year 1979 for defects that could cause the automatic cruise control device to jam.
The cruise control recall affected 1979 model XJ12 saloons and 1982 to 1990 model XJ-Ss. Then, in March, Ford disclosed in its annual report that it had paid five times the actual net asset value of Jaguar Cars in order to acquire the company. Ford had paid $2.5 billion or £1.6 billion. In the report, Ford said the $2 billion it paid over Jaguar’s net asset value would be spread over 40 years.
On 27 March 1990, after ten years as Chairman of Jaguar, Sir John Egan (above left, with William Lyons) said that he would retire at the end of June 1990. The Ford Motor Company appointed Bill Hayden, then Vice-President of Ford’s European manufacturing group, to succeed Sir John Egan. Bill Hayden became Chief Executive of the Jaguar Board, while Sir John Egan would be Non-Executive Chairman for the next three months.
Sir John Egan was quoted as saying: ‘My advice to Ford was that the big growth opportunities available to Jaguar under their ownership could only be fully exploited if the company were led by a senior Ford executive. I am, therefore, delighted to hand over Jaguar to Bill Hayden.’
Sir John Egan later said: ‘We had a choice in the 1980s: to keep making antiques or to create a design and development process that would allow world-class products and quality. Ford’s initial aggressive takeover was premature in that we were talking to other companies. When they contacted us, we realised the game was up. We wanted to be sure we got a good price for shareholders.’
Sir John Egan announces he’s leaving, the F-Type is canned
One of the first things Bill Hayden did was to axe the XJ41/42 F-Type (above) intended to replace the XJ-S. He wanted to know what was the justification for the F-Type, the sports car concept Jaguar Engineers had been working on since 1980. Hayden thought the car was going to be overweight and underpowered.
Bill Hayden commented in 1999: ‘The marketing guy said he never believed in it. The finance guy said we could never price it. We could never recover the costs. It was a rubbish car. I said, “Let’s kill the damn thing”.’
The new Ford men concluded it would have been overweight, underpowered and inadequate in fuel efficiency. It was also still four years away from production, and it had been started in 1980 – for the moment, the XJ-S replacement was put on hold.
Ford’s new Brit in charge of Jaguar
So who was the new man in charge? Bill Hayden (above, with Tom Walkinshaw in 1988) was born in West Ham, East London on 19 January 1929. Hayden was motivated by two things as a young man: money and cars. His father worked in ship repair and, outside the war years, could never be guaranteed work. Custom House, the area in which he was brought up, was badly blitzed during the Second World War and Hayden was evacuated to Romford and its technical college where he was educated.
However, his first job was anything but technical. He had an aptitude for figures and a headmaster ‘who had a pal who was a stockbroker. Hayden became a blue-button, a lowly messenger on the Stock Exchange floor, then a traditional City outlet for likely lads from the East End, and returned to Throgmorton Street after National Service, largely spent in Germany.
He did not stay long. Cars were his passion and, when aged 20, Hayden landed a job in the cost-accounting department of Briggs Motor Bodies, responsible for Ford bodies and other cars such as the Jowett Javelin, which Ford itself had acquired when the US owner of Briggs died in the early 1950s. Bill Hayden then joined Ford’s Finance Department. He went on to become the figures man behind the launch of the Cortina and justified the building of Halewood, Ford’s factory on Merseyside.
‘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.’
– Bill Hayden
He moved to senior manufacturing management in 1966 and, by 1972, had joined the board of the Ford Motor Company Limited. Hayden stayed in the fast lane and in 1973 took on the responsibility of all Ford’s European manufacturing operations, a job he held until May 1989 when Ford sent him to Detroit to head R&D and Design. The day his wife arrived from England to buy a house was the day Ford bought Jaguar.
‘They told me I had better go back,’ he said. Told that he could pick his own team Hayden moved into Jaguar in January 1990 at which point Sir John Egan told Hayden he was planning to quit. Hayden said he knew he would get the job. Working with Egan was ‘suddenly different, it was rather peculiar.’
Bill Hayden later said in an interview with The Observer magazine: ‘We bought it for the image of Jaguar and the marque. The factories are not worth $2.4 billion. We have to update and protect the marque and keep it as an entirely separate entity from Ford. This is one way of protecting that $2.4 billion,’ which, he said, was a lesser figure than Ford would have spent to start a luxury car division from scratch.
With Sir John Egan moved sideways for the time being and his days at Jaguar numbered, the men from Ford began to speak candidly to the media about their new division, perhaps too candidly, for it was reported in the American media in all its negative glory. Bill Hayden admitted that he found some archaic practices at Jaguar.
‘There are two unions here that I thought went out 20 years ago. And there are more sheet-metal workers here than in the entire business of Ford Europe. There have been lots of little stoppages for such a small company, but with time and understanding we will sort it out. With Toyota and Nissan entering the luxury market we will have to learn to fight together and not each other. I am sure we will.’
He stressed the Japanese threat and said the leather and walnut skills of Jaguar would have to be adapted to meet longer production runs. Overall, he was no fan of the British worker or British management. ‘They do not have flair, ingenuity, or drive. I sum up the UK nature by telling people we invented all the games that are popular in the world.’
Bill Hayden also told CAR Magazine in a quote that was reported around the world: ‘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.’ He also said: ‘It wasn’t that Jaguar’s quality was bad, it was horrendous… It was a terrible organisation making terrible cars… My concern was that, with the exception of a few people, most of the Jaguar people – their belief about Ford Motor Company was pretty poor… Second, they didn’t really seem to understand what a mess they were in. They seemed to think just being Jaguar, somehow they would survive. Somehow, I had to get their attention.’
Trouble at the top
Fellow Briton John Grant, now Deputy Chairman, said of Jaguar: ‘Surprising, in terms of its depth of engineering and technical talent. Appalling, in its management of production and quality issues. Incredibly naïve in terms of dealing with its potential in the developing global market for luxury cars.’
He added: ‘It was pretty clear looking from the outside that manufacturing was not Jaguar’s strength. But the extent of the under-investment was a little bit of a surprise. The work practices had actually gone backward,’ since the British Government had privatised Jaguar in 1984.
Terry Green, a former line worker at Browns Lane, remembered Bill Hayden’s Gorky comment. ‘I’ve got to be honest. The lads were sick on the shop floor. They couldn’t believe a person would say such a thing. It wasn’t very good for public relations.’
‘Appalling, in its management of production and quality issues. Incredibly naïve in terms of dealing with its potential in the developing global market for luxury cars.’
– John Grant
In retirement Bill Hayden would go into greater detail about what he found at Jaguar: ‘I was disgusted. I could not believe my eyes. The only thing I could believe was the JD Power Survey. It wasn’t that the quality was bad. It was horrendous.
‘In the engine plant, Radford, on the V12 line, they were making 300 V12s a day, and there were a couple of thousand reject blocks and heads on the floor just piled up. At the end of the camshaft line, they had an electronic gauge and it was not even plugged in. I said, “It’s not plugged in.” They said they had a portable hand tool plugged into the socket.
‘So they said, “Oh, we’ll plug it in.” To their horror, the lead didn’t reach. It was horrible, absolutely terrible. Warranty and policy claims were 13 per cent of revenue vs 2 per cent at Ford. We were actually having to buy cars back in the States. (In a test for water leaks) they’d… leave some spots unmarked. I said, “Why aren’t they marked up?” They said they couldn’t fix them. So they just didn’t even bother to report them.
That was the mentality at the time. The Jaguar people had a thing about airbags. They didn’t believe in them. I had terrible trouble saying to them, “You guys can fight as long as you want, but you sell a minuscule volume in the States. You’re talking about a massive market. Who do you think is going to listen to your doubts about airbag legislation?” Part of it was their products weren’t designed for airbags. They were going on the philosophy they didn’t have to design for it because they didn’t believe in it.’
Bruce Blythe said: ‘On a scale of one to ten, if we thought it was three or four, it turned out to be eight or nine on the scale of badness.’
Bad management – bad practices
Bill Hayden did not have a good view of the management either: ‘You went to the office at quarter to eight at Ford, sometimes earlier. At Jaguar, all the managers were rolling in at quarter past nine. I began calling meetings at eight to get their attention. Eventually I did, but it took a long time. Their attitude was, “We’re Directors. We come in late and leave early”. I said, “That’s not the way the Ford system works”.’
Production line worker Terry Green said of senior management, ‘Bosses used to walk around in suits. They didn’t even know your name. If we had a problem on a job … we’d get an Engineer in here a week later.’
In the past, Jaguar executives had steered public attention to the craftsmen who hand-worked the leather and the burled walnut that had 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.
This was a legacy of the deal that ended piecework at Jaguar in 1972 after a ten-week pay strike. Unlike Harold Musgrove over at Austin Rover, the John Egan-era management had not confronted its workforce, who also happened to be shareholders, over these issues.
A Jaguar Transition Team Report, written in early 1990 stated: ‘Reported stoppages of work accounted for only 0.3 per cent of hours lost in 1989, but this may have been because management was historically reluctant to press its view to the point of conflict.’
‘At Jaguar, all the managers were rolling in at 9.15. I began calling meetings at 8am to get their attention. Eventually I did, but it took a long time. Their attitude was, “We’re Directors. We come in late and leave early”. I said, “That’s not the way the Ford system works”.’
– Bill Hayden
Just how bad Jaguar’s plants were was apparent in the findings of a study of the motor industry by the Massachusetts Institute of Technology. Jaguar used about 110 hours of labour to weld, paint and assemble a car, while the German luxury car makers needed about 80 hours and the Japanese 20 hours. Jaguar’s product development was described as not in much better shape. Bill Hayden pronounced it as ‘out of control’.
All this was reported in the American media which, combined with the recall notice in February, did little for Jaguar’s image and sales. In June, Jaguar ended nightshifts at the Castle Bromwich paint shop, much to the chagrin of the work force who lost out on special premium payments. At the end of August 1990, Jaguar announced the retirement of Graham Whitehead, President of Jaguar Cars Inc. in the USA, and his replacement by Mike Dale. Mike Dale had been appointed as part of a rescue team for Jaguar.
New blood arrives at Jaguar
In September, Jaguar announced that the 2.9-litre AJ6 engine in the XJ40 saloon was to be replaced by a new 3.2-litre unit (above). Then on 29 September, Jaguar announced that Technical Director Jim Randle had been appointed to the new post of Director Vehicle and Concepts Engineering, and that Clive Ennos was joining Jaguar from Ford, in the role of Director Product Engineering Operations.
Jim Randle was effectively being moved sideways and replaced by Clive Ennos, the former Executive Director of Product Development at Ford of Britain. Although highly rated as an Engineer, Jim Randle was carrying the can for the XJ40’s woes and the delay in the XJ41/42 sports car. As well as the XJ41/42, the XJ81 V12 saloon was axed and a fresh start ordered.
Clive Ennos had started his career at Westland Helicopters before joining Ford in 1966 and worked his way up. He inherited a team of Engineers who had mostly been with Jaguar for less than five years, and which had an average age of only 33 years of age. They were eager to learn the new Ford-inspired design processes. Ford were also impressed by the Powertrain Department headed by Trevor Crisp, who Clive Ennos rated as the best engine man in Britain.
The new regime’s ten-year plan called for a new generation of models to replace the XJ40 and the XJ-S. The goal was to have both new models on the market by the mid-1990s, when the plan envisioned annual sales reaching 65,000 cars, up from the record 49,494 sold in 1988. Then in the late 1990s, Jaguar would add a line of smaller, sportier saloons designed to appeal to the kind of younger buyers who bought the BMW 5 Series, but looked down their noses at the Granada Scorpio, Ford’s top-of-the-line European car.
The hope was that this 5 Series competitor would enable Jaguar to increase its sales to more than 150,000 in a decade. Bill Hayden made it clear that this car would be a successor to the 1960s Mk2 and was, ‘the car we want to build.’ This car became the S-Type of 1998.
Jaguar would have to up its game – and its prices
Hayden also 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 was much more important. Jaguar’s new management believed they could quickly cut materials costs by 8 per cent. They had started to take advantage of Ford’s buying muscle to obtain lower prices from suppliers, and they would also buy many small components Jaguar then made, like screws and shims. For its part, Ford showed no regrets about buying Jaguar.
‘We’re happy we made the purchase. It was a long-term vision. We don’t expect results overnight,’ said Lindsey Halstead. Jaguar’s fortunes in the USA seemed to be in decline after the hype of the Egan era. The latest JD Power quality poll of owners ranked Jaguar 28th of the 29 manufacturers surveyed. Only Korea’s Hyundai – which, at prices that started at $6300, costing some $33,000 less – did worse. Complaints about the reliability of Jaguars seemed to be part of owning one.
Most complaints were probably about the XJ40. In November 1990 56 per cent of the 9000-member Jaguar work force voted in favour of a two-year deal that raised pay 12.5 per cent the first year and either 7 per cent or the rate of inflation the next year, whichever was greater. The Jaguar deal had benefits for the company. In return for high pay levels, the company secured improved flexible working designed to do away with the remaining restrictive practices on the shopfloor. The company maintained that this alone produced savings of 4 per cent on the wages bill.
In the space of 12 months Ford’s highly-trained production experts had demolished the Jaguar myth. Although beautiful too look at, a Jaguar was a car built using outdated working practices and antiquated production machinery. The cars were underdeveloped by a relatively small design staff, who had no hope of competing with the greater resources of BMW, Mercedes-Benz and Lexus.
Why had Jaguar’s quality slipped so much?
How had this situation come about? It appears no one had asked the pertinent question: how was it the manufacturer of some of the world’s best cars was a minnow in industry terms, even for a luxury car manufacturer?
Perhaps the answer lies in the past. Founder Sir William Lyons was parsimonious in his approach to Jaguar’s manufacturing capability. By using secondhand equipment and ‘make do and mend’ methods, he had been able to make a profit out of selling less than 25,000 cars a year during the 1960s – and this included manufacturing his own engines.
The Browns Lane assembly plant had an assembly line that was bought secondhand from the Standard Motor Company, and body finishing and painting equipment that was bought secondhand from Mulliner’s works in Birmingham. Another example was to be found in the poor quality of the tooling, designed and owned by Jaguar, used in the pressing of body panels, leading later Jaguar boss Geoffrey Robinson to remark that, ‘Bill Lyons wanted a first-class body shell off third-class tooling’.
The car that really established the Jaguar brand was the XK120 (above), the decision to go for an advanced twin-cam engine, when the rest of the industry was only just starting to discard side valve units in favour of the over head valve configuration, was to pay dividends in the decades to come. With the XK120 holding the title of the world’s fastest production car, international celebrities queued up to buy one and the brand was soon in the fast lane of premium car manufacturers.
The 1950s success at Le Mans had given Jaguar a sporting cachet that boosted sales further and gave it greater prominence than other British luxury car manufacturers, many of whom ceased trading in the post-World War II era. The uncompromising pursuit of refinement in a motor car, culminating in the XJ12 of 1972, was what set Jaguar apart from its many British contemporaries, and gained the company a global fan base. Maybe a Rolls-Royce was better built, but did it drive like a Jaguar?
Sir William Lyons, like Ettore Bugatti, not only ran the company, he styled the cars, and he styled them very well. Sir William Lyons preferred to expand Jaguar with internally-generated capital, not through borrowing and, unlike Bugatti, Jaguar managed to stay in business when all around them ceased trading. The 1950s had seen the death of French luxury brands such as Bugatti, Delage, Delahaye and Avions Voisins, while British brands such as Armstrong Siddeley and Alvis disappeared. Daimler survived as badge-engineered Jaguars while Aston Martin’s finances were constantly in a state of flux until taken over by Ford.
However, even so, until the arrival of the XJ6 in 1968, there was simply not the demand for Jaguar cars to push production above the 25,000 mark. Part of this may have been a reputation for poor quality in the important American market. The XK engine had a reputation for overheating in hot weather, and the American media were more open in their criticism of Jaguar quality than the more compliant British motoring press.
Indeed, one journalist in one of the British car weeklies made adverse comments about the MkX, which brought down upon the Editor the full wrath of Sir William Lyons, and the magazine effectively apologised to Jaguar. The Jaguar myth would claim that poor quality did not start until the Series 2 XJ came along in 1973, but American customers had experienced it long before then. Perhaps a sense of pride in Jaguar, multiple winners of Le Mans and manufacturer of the E-type and XJ saloon, the best car in the world, prevented Britons from looking at the company objectively.
While Jaguar’s small design team focused its attention on engine, chassis and suspension refinement, ill-fitting trim and fragile interior fittings were of secondary importance.
For around 25,000 loyal customers a year, this was more than enough, but the arrival of mass-produced Japanese cars in the 1970s upped the game in terms of quality control, panel fit and reliability, and now luxury car owners expected their new expensive barge to be better built than a cheap far eastern runabout. On the Jaguar production line well into the 1980s the various steel panels, produced by different outside companies, did not fit together properly, a problem that required a lot of hand finishing work before the cars were perfect. The practice of using hand-moulded lead to fill in gaps and undulations and achieve the required lines, known as lead loading, became the norm.
Ford would have to try and break the cycle of a reputation for poor quality depressing sales by investing some serious cash in the hope that it would boost demand for Jaguar cars and hope that they would get a return on its investment. While it is easy to criticise Sir William Lyons for his parsimony from the comfort of an armchair, he had single handedly created Jaguar Cars from nothing, and his careful husbanding of resources had enabled the company to be profitable and survive into the 1970s.
How to move Jaguar forward? A new engine family
It is perhaps unfair to compare Jaguar to BMW and Mercedes-Benz. Jaguar had focused on large luxury cars and sports cars, while their German rivals had been able to expand downwards into the 2.0-litre executive car segment where the volume was. The formation of British Leyland in 1968 killed any notion of this, as this was the province of Rover and Triumph.
Corporate decree therefore meant that Jaguar was limited to producing cars with engines of 3.4-litres or more and that restricted volume. However, Jaguar did not help themselves by effectively refusing to be a team player by sharing components with Rover and Triumph in order to reduce costs. This was not something that happened at BMW and Mercedes-Benz.
Jaguar engineering had looked down on the products of Longbridge and Cowley, but Austin Rover had now learnt how to design cars from Honda, and Jaguar would now learn from Ford. The American giant would show Jaguar how to design parts to fit, rather than assembly line workers adapting them to fit.
Moreover, to compound matters, it now transpired that the heart of the XJ40, the AJ6 engine, was now regarded by Jaguar as inferior to the Lexus V8. To Jaguar Engineers, brought up with the tradition that mechanical refinement could only be arrived at through the use of six- and 12-cylinder engines, the refinement of the Lexus V8 came as a shock, because it was considerably smoother and more economical than the 4.0-litre AJ6.
So around 1990, only seven years after the AJ6 had made its public debut, Jaguar was actively looking at replacing it. The then Jaguar Powertrain Director, Trevor Crisp, takes up the story: ‘The decision on number of cylinders was far less obvious as we had to balance the frequently conflicting requirements of refinement, cost, economy and emissions. Our market research clearly indicated that refinement was a priority, and to achieve the programme objectives for this feature we believed that we needed a minimum of eight cylinders. A short stroke ‘six’ was considered but rejected due to the anticipated hydrocarbon emission problem and increased weight of the reciprocating components.
‘Ten cylinders were rejected on the grounds of inherent design imbalance, and 12 cylinders for cost and increased friction giving poorer fuel consumption. By concentrating on reducing the reciprocating weight and increasing the rigidity of the engine and transmission structure, we also considered that we could obtain refinement levels equal to, or better than, our existing V12 engine. A vee configuration, of course, gives a very compact package and greater freedom of design for the whole vehicle.’
With six, 10 and 12 cylinders ruled out the new Jaguar engine would be a V8, but as Jaguar had no money it would mean more expense for new owners Ford. This engine would become the AJ26 V8 which made its debut in the XK8 of 1996.
Jaguar had an ambivalent relationship with V8 engines. It had inherited two excellent Edward Turner-designed V8 engines when they had taken over Daimler in 1960. The 2.5-litre engine was used in a Daimler version of the Mk2, which embarrassed the equivalent 2.4-litre XK unit. It was suggested that the 4.5-litre version could be enlarged to a full-fat 5.0-litres for use in the MkX, but developing the V12 was preferred. The official explanation seemed to be that the Daimler V8s could not be adapted for mass production, but one suspects that it was more of a case of not invented here.
Next Jaguar tried to develop a 60-degree V8 engine out of the V12 in order to maximise its investment, and that failed for technical reasons. Always lurking in the shadows was the ex-GM Rover V8, which was rejected because it was not designed by Jaguar and was therefore automatically deemed to be inferior. When Jaguar eventually replaced the XK engine it was with the six cylinder AJ6, with Harry Mundy claiming most of the credit for its design. Many of the world’s major car makers had opted for the V8 layout, not just American ones, they were smoother than a six cylinder, regardless of what Browns Lane may have thought, and without the complexity of a V12.
In truth, there was nothing wrong with the Daimler and Rover V8s, but Jaguar convinced itself that it could do better. The whole mindset of refusing to share components with other manufacturers because they were deemed to be inferior because they were not designed by Jaguar would soon go out of the window.