AROnline Contributor Martyn Kelham has produced this series on the great motoring men. Here, in the sixth part, he discusses Sir John Egan, the man most often credited for saving Jaguar from the abyss in the early 1980s.
The 12 years prior to Egan’s appointment as Chief Executive of Jaguar were tumultuous indeed. The great vision and hope of British Leyland had been beset by problems – many of the company’s own making. Some were inherited and difficult to remedy and some were foisted upon them by successive Governments. At the time, other countries were also suffering from worker unrest and political mayhem, yet somehow our beloved country got a reputation as the ‘Sick Man of Europe.’
Amid atrocious labour relations Margaret Thatcher and Michael Edwardes had fought gallantly to restore some sort of order and allow the bosses to govern, which is, after all, the correct order of things.
Clearly, we could not go on losing 32,000 man hours a year. Just to add to the company’s woes, the Conservative Government orchestrated a hike in the pound and demonstrated less than enthusiastic support for BL – so that exports virtually hit a brick wall.
From Unipart to Jaguar
Sir John had successfully inspired Unipart despite the unions, and it had become a successful business. Thus, Michael Edwardes asked Egan if he would step into the Jaguar hot seat in April 1980, and that’s where this brief account really begins.
By his own admission, Egan’s route to the higher levels of BLMC had been tinged with a lot of good luck. He was able to identify very easily a realistic saving of around £10 million a year – by working better with Government financial requirements. He developed a system for comparing costs with competitor’s costs. His parts business had recorded a £70 million pound profit per year.
In part, he accepted the post as the new Jaguar boss because he could see that Michael Edwardes had a realistic plan (unlike the Ryder Report). He also saw that Edwardes was a man who had a good chance of handling the unions – and allowing Egan to get cars made to a reasonable standard of quality.
Turnaround or closure – it’s on Egan’s head
We must remember that at this point Jaguar was losing money and Edwardes had made it clear that, unless a turn-around was imminent, Jaguar would have to close. No pressure then…
Egan’s first day began by arriving at the gates and walking straight into a full-blown ‘braziers-burning’ strike. This was all to do with the new ‘grading structure’ that had been accepted else ware in BL. Egan found out very quickly that the men were not going to keel over on this one – and neither was his Chairman, Percy Plant, who was a ‘figures’ man. The resultant stalemate was likely to lead to the closure of the firm.
After discussions with Plant and Edwardes, Egan was given a chance to put things right – but not to compromise on the grading agreement. Part of the problem was that the men had really ‘given up.’ They believed the company was doomed anyway, so why give in on this significant point?
Egan knew the men had good reason to be demoralised. They knew, as he did, that the present paint process was fundamentally flawed and huge sums of money were needed for a new engine and a new car. He could promise nothing in this regard.
How to gain the workers’ trust
Egan had to gain trust yet had nothing to bargain with except what the men did not want to hear. However, somehow he convinced the men and the unions to work together, to make Jaguar great again. No small feat!
Despite various knife-edge meetings which, in some cases, went on for days (with cardboard cut-outs of Michael Edwardes in attendance), Egan, fully supported by Sir William Lyons, mapped out the path for recovery.
Despite all the optimism, the whole thing would fall flat on its face if the Castle Bromwich plant could not paint a car in a wider range of colours. Even the banana yellow was not a wonderful finish! Every car was being rejected and lots of work was required to get them saleable.
Fixing the technical issues
Hidden problems began to rear their head. Obscure issues that even then were totally unacceptable – such as not a black face in the plant! Then there was the fixing of all the technical issues at the plant and the ancient nature of the building and equipment. Even the steel from British Steel had to be upgraded. Egan had to go back to square one and nothing was too far back in the ‘root cause analysis.’ A fuel hose causing under bonnet fires demanded a recall of 40,000 cars – but the replacement hose continued to fail and eventually owners had to be told not to use their cars!
A real live problem that beset the company every day was the appalling sales of around half of the break even figure. The losses were disastrous, amounting to around £50 million per year. The appointment of John Edwards from Massey Ferguson to look after finance was a good move. Egan’s other appointments had to be – and mostly were – inspired. The right people had to be in the right place.
But in among all this good stuff that was going on, irate customers were still on the ‘phone. One turned up the factory gates with a TV crew threatening to burn his car where it stood!
Egan also had to accept some discouraging statistics when compared with the competition. Jaguar had three times as many first year warranty complaints as Mercedes-Benz. That company was producing six cars per man, compared with Jaguar’s one point two five. Mercedes had around five times as many Engineers and their profitability was running at 10% – something of a contrast to the British manufacturer’s minus 30%!
How to sort the suppliers?
One of the biggest problems was warranty claims on supplier’s components. For example, 40% of the steering pumps from one manufacturer failed under warranty! Lucas was another problem supplier – the quality and reliability was abysmal. Egan considered it so bad that the probable effort in getting it right would be Herculean. He even approached Bosch, but that company was not keen to help as it didn’t think Jaguar would last long enough to set everything up!
Initially, Lucas was shocked at the reports from Jaguar. As far as it was concerned business was good and the aftermarket business was very good! This is not surprising as the failure rate in the second year provided very good replacement business! However, with very little persuasion, Lucas did take on board the criticism and significantly upgraded the quality of its components – in fact, the area where Jaguar parts were made was a ‘show-piece’ and later influenced the rest of the factory operation.
Egan himself worked on these two significant suppliers as well as on lesser items like failing door handles and failing radio aerials and noisy differentials. Also identified were ill-fitting windscreens and one supplier of the two, had to be ‘dismissed’.
Overturning penny-pinching predecessors
Some of the problems were easily overcome – mostly those that the previous management had attacked with a penny-pinching attitude. Cars were over-heating because the fan was too small. The remedy? Fit two fans. It cost a little more, but meant that Jaguars were not embarrassingly over-heating across the world.
Sir John is a great speaker and his skill in persuading dealers, particularly in the US, that Jaguar was reborn and would experience a sea-change in quality control was crucial. All this sales effort and warranty work, plus giving substantial incentives to dealers, cost a lot of money. Egan had to hope that sales were going to justify the expenditure.
A year or so into Egan’s tenure, he had to go to the Government for £100 million to launch the new models that were planned (though not, at that stage, anywhere near finalised). Norman Tebbit was the Secretary of State for Industry and, despite a policy of not supporting the poorest performing companies (a category Jaguar firmly occupied), Tebbit was persuaded that Jaguar should be given a chance.
Egan gets Edwardes’ full backing
Michael Edwardes and the BL Board had now given broad support for what was happening at Jaguar – but they then furnished some new strictures. They would have to reduce staffing by 20% and increase production by 50% – and, of course, increase sales by a corresponding number. In essence they wanted profitability by 1982. By now, nobody doubted that, if Edwardes said something, he meant it.
In his book, Sir John leaves the reader in no doubt that the pressures of the job, no matter how positive some of the plans and achievements, left him absolutely shattered at the end of each day! Sometimes the bureaucracy just got to him. It seemed that as many obstacles to growth as possible, were put in his way.
The US market was vitally important and much time and investment lavished on the dealers. Jaguar had organised very ‘orchestrated’ visits to the factory, where the workforce was encouraged to ‘sell themselves’ and their product, to their visitors.
Trying not to live up to past failures
The history of British Leyland reveals that no BMC or BL sales forecast for any model had ever been right. BL routinely failed by a significant margin to reach its own targets. This is something the Japanese found difficult to cope with when BL made the Honda connection. However, in company terms, Egan’s sales forecast for Jaguar of 9000 units was actually beaten – and 9700 units were sold by the US dealers.
The result was that the company was in profit as predicted – and required by Edwardes – by 1982. The total sales forecast was also beaten by 500 units at 22,500. Egan had developed a new sports centre and swimming pool.
The workforce had evening presentations for themselves and their wives. Cricket matches and visits to watch Jaguars on the race track were organised. A ‘family’ had to be developed and belief in this family was vital to the success of Jaguar. This initiative, together with ‘Open Learning’ (not only concerned with ‘Jaguar’ related skills but also life skills where staff were encouraged to widen their knowledge in various life subjects) was a huge success. A lot of work was undertaken with the Warwick Business School Dean, George Bain.
The ‘take-up’ for these courses was around 40% and those involved were beginning to see the folly of the ‘minimum work for maximum wage’ attitude. Both the workforce and the company would benefit from a change of thought and behaviour.
The result was that huge quality and productivity improvements were made during this period. A side effect of these radical moves was that the militancy element was clearly uncomfortable in this ‘let’s all work together’ atmosphere – and many left.
On occasions in our history, a militant element may have been proved right in their pessimistic outlook and the industry or company ultimately died despite sterling efforts by everyone involved. Jaguar is still with us and proves that all the effort by Lyons, Egan, and Edwardes – and a hugely-dedicated workforce – was worth it!
This is not to say everything was coming up roses. Increased wage demands were still the order of the day. But the trio of Edwardes, Egan and Thatcher was relentless in dealing with unrealistic demands – and almost always won the day.
What if BL went under?
However, Egan had to consider that BL itself might go under. Other avenues were explored as a ‘Plan B’ – including a management ‘buyout’ and a serious association with BMW. The next difficult phase was to get the European dealers fully on-side as well. This meant sorting out the dead wood dealerships – and majoring and supporting the remaining 100.
Unlike the torrid time for British Leyland when it was formed, the sterling rate change worked well for Jaguar. The US dollar fell from $2 to the pound to $1.50 in 1983. All Jaguar’s Christmases had come at once!
Forecasts of a £50 million profit, thousands of satisfied customers and victory in the Tourist Trophy race in 1982, all meant the company had at last got a real chance of survival. Michael Edwardes leaving the fold at this time did little to help Jaguar’s case though. Pressure was mounting to prepare the company for sale and the XJ40 programme was to be ‘hurried’ through – against Egan’s best efforts. BL had done this so many times before – releasing a car before proper trials – and it was one of Egan’s hobby horses that this should not happen at Jaguar. Meanwhile, Jaguar was doing good business and Martin Brundle had put up a sterling performance, beating the BMW’s at Donington that year.
By 1984, things were moving quite fast. Discussions with GM – and later discussions with Norman Lamont about an Initial Public Offering (IPO) – and a Government ‘Golden Share’ were being considered.
As far as Egan was concerned, various supplier issues had to be resolved first. The most dire was the supply of pressed steel panels which were still not up to the standard he was looking for. He also wanted to give BLEO – the people who sold Jaguars throughout Europe – 12 months’ notice as their performance was poor. A real oddity to ‘manage out’ was that BL had allowed the Jaguar name to lapse and so they did not own it.
It was now allotted to a low grade tennis racket manufacturer in Pakistan. The answer was to buy the racket company. This proved to be very successful and the Jaguar sports bags became a market leader in the UK. With the loss of real-time support following Michael Edwardes’ departure, Egan needed a friend and Norman Lamont proved to be that individual.
However, Margaret Thatcher was in the driving seat and following ‘some leaks’ (on an evening news programme) that mentioned possible privatisation or being bought by GM, she gave the instruction to BL to float Jaguar immediately. This ignored any niceties of programming with regards to the release of the XJ40!
Heading to a share offer
Egan had a worrying moment when Hill Samuel, the underwriters of the IPO, insisted that the company had a Non-Executive Chairman working with him. As it turned out, this individual was one Hamish Orr-Ewing, then Chairman of Rank Xerox amongst other important posts. Egan describes him as a ‘courteous and knowledgeable’ gentleman and when I met him briefly at his home one day – he was certainly that. He did quiz me though as to why I had purchased an Alfa Romeo 156 Sportwagon and not an X-Type Estate.
I told him that I had delivered new Jaguars in the 1970s and rarely got to the destination without breaking down – and that I just loved Alfas. His response was a non-committal, ‘Mmmmm’. Unfortunately, the relationship between Egan and Orr-Ewing degenerated in later years and Egan eventually had to dismiss him.
Meanwhile, success bread success and the revitalisation of Jaguar in Germany resulted in a 60% increase in sales and the dollar exchange rate was still running in the company’s favour.
At this point Egan’s relationship with Ray Horrocks was not good – and getting worse. Horrocks was trying to tie Jaguar into a three year contract with BL – essentially making the company unviable if it left the umbrella company. Egan was having none of it and Horrocks left the company at the same time as Orr-Ewing.
Needing a level playing field
Things like this had to be sorted and were. The company had to have a level playing field – and the IPO was a total success being eight times over-subscribed. Now privatised, Egan’s desire to run a successful racing programme was a real possibility. It had to be recognised though that racing – to Le Mans level – was going to be expensive. The very good association with TWR and the management of the competition cars had to be reviewed and made more effective. Back in the real world, and against the previous regime’s requirements, the XJ40 had been delayed in order that the car was released as near perfect as possible.
Getting to this point was fraught with difficulties. This was not least due to a 20% wage claim and union Shop Stewards still not listening. The cars’ prices could be raised by 3.5% but, because the company was profitable (though not in the same league as some of its competitors), the unions felt they had a good case for more money. The company could no longer shout ‘bankruptcy’ as a realistic tool in negotiations.
The move to secret ballots was a sea-change in operating the company. The ‘bully-boy’ tactics of the unions and having ‘heavies’ leaning on the workforce was over. They had previously made anyone who actually wanted to work, feel threatened in mass meetings. The writer’s father suffered many instances of this.
Cutting ties with BL
The issue of poor pressings from BL remained and eventually Jaguar formed a joint venture with GKN – and made its own panels to a higher standard. Egan needed (and had) good people in his team. One such was John Morgan who was asked to set up a new world-wide sales network, so that they no longer needed the BLEO. Amazingly, Morgan did this in just three weeks!
At this point, Egan had decided that this revitalised world-class company needed a world-class headquarters and production facility. A very modern building had been built by Armstrong Whitley and later occupied by the Chrysler Corporation as an R&D centre. Despite its ‘mausoleum atmosphere’ Egan took the Whitley Engineering Centre (below) on and had it upgraded significantly to reflect the now prosperous and forward thinking company.
Establishing a working Board had been an absolute nightmare – certainly in getting a non-executive Board to be on the same wavelength as the company, had proved most challenging.
However, amongst all this aggravation, great things had been accomplished. In 1980 Jaguar had been the worst performer in the all-powerful JD Power survey of quality and service. Five years later the company achieved fifth place just behind Mercedes. The leaders were all Japanese companies. Jaguar was rebuilding its reputation and selling cars – 41,000 of them in 1985. Egan had also got an increase in Engineers from the paltry 200 or so up to more than 1,000. A new Styling Studio had also been opened.
Growing the race programme
The budget continued to support the race programme and lavish sales events – a programme of hospitality that was paying handsome dividends. From the ‘in debt with no future’ company that Egan had walked into, Jaguar now recorded pre-tax profits of £121 million – a first for a British car company!
The company was now fiercely independent but recognised that the bigger organisations would now consider them a ‘gem’ – and a take-over was always possible. A bid from Hanson was broached but it was quickly realised that GM, BMW and even Ford would probably want the brand. It was also realised that a partner would be needed moving forward. Jaguar, though successful, were very small in the big scheme of things.
Following extensive testing, (probably more than ever before in the history of Jaguar) the XJ40 was finally released in 1986. Again, the combination of ‘top drawer’ PR and a reliable and well-performing car – made the launch a huge success. Despite this, in his book ‘Saving Jaguar’, Egan explains that he was wrong to allow production to steam ahead. The pressures of not wanting a huge delivery time for customers had led to a subsequent loss of quality. An understandable (but unforgivable?) mistake.
Cars shipped to the US were suffering battery problems. The time taken in transit without use didn’t suit the type used. During testing, even in the most rigorous conditions, this had of course never shown up. Similarly, the Dunlop Denovo ‘run-flat’ tyres did not like being stationary for a long time – and the subsequent ride was not up to Jaguar’s standards. Last minute upgrades (while all designed to make things better) resulted in components and fixings failing through lack of testing and proving.
More than 200,000 cars later, the XJ40 had proved that it was a good car. The initial problems which the company had tried so hard to eliminate, did let the side down. Again, Egan blamed himself for not getting this right. Ultimately, the car had dropped Jaguar from fifth place to fourteenth in the JD Power surveys.
Now, Egan and his team were aware of a changing world – with more emphasis on the environment and frugality in engine performance. Total Quality Management (TQM) was being considered and Egan was still conscious of the vulnerability of the company – and still considering a tie up with a partner – if for no other reason than to drive down costs but maintain a high quality of components.
The Jaguar XJ-S Convertible was selling well – a car more popular than its ‘flying buttress’ hard top sister. Jaguar had won Daytona and the Le Mans 24 Hour races. The political climate was much better than ever before in the history of the company. The Conservative Government had been a great ally and strong management allowed the company to introduce new models without a backlash of Shop Steward-driven union action against progress.
Talks continued apace with prospective partners – namely Toyota but, as so often happens in ‘big business,’ they proved to be a red herring. Although at least three other companies were interested – Toyota had been the best fit as far as Jaguar were concerned.
Meanwhile, Jaguar sped on with development of a 50mpg car that would use a small jet engine to charge a battery that would drive four electric motors – one on each wheel. It is often a mystery to observers that car companies spend so much on racing – often at a loss to understand quite what they are getting out of it. If a company’s car wins the Le Mans 24 Hour race, do ‘punters’ really go out and buy that model because of it? In Jaguar’s case, yes – and the figures proved the point. In 1982, Jaguar had beaten BMW having spent a lot less money.
The link with Tom Walkinshaw and TWR had been a huge success story. Money well spent.
Racing: an expensive endeavour
The sponsorship issue had been a different kettle of fish. Not many manufacturers would sink £20-30 million over three years in a race team – except tobacco companies. In 1987, Jaguar won eight out of ten World Sports Car Championship events with its 7.0-litre V12 engined XJR-8.
Porsche also succumbed to the mighty V12 in 1988 when the XJR-9 beat Porsche in the Daytona 24 Hours. Spurred on by this incentive, the team aimed high – wanting to win Le Mans. This they did, despite a broken windshield being replaced and losing all the gears but fourth in one car. It is believed that Porsche also had mechanical problems as one of their cars slowed considerably during the ‘hottest’ part of the race.
Performance at a later Miami Grand Prix was unfortunately very disappointing. Not only did the PR effort to keep Castrol on board as a main sponsor go ‘belly-up’ but the race itself was awful with the second car blowing up on the way to start line. The first car crashed on lap seven. Castrol withdrew sponsorship and racing days were effectively over. The only saving grace that came out of that bad time was the gorgeous TWR manufactured XJ220 with its very respected V6 engine.
On a clear day, we can see Ford
Let’s make no mistake, the eventual Ford takeover was hostile. Egan tried desperately to have some sort of a deal with GM – and equally tried hard to find another partner. The fear was that Ford only knew the Ford way. As has been covered elsewhere in this series, the Ford way was not always the best way for others – even if was for Ford. The Board made the decision that Ford was not the way to go. As if to prove a point, a hostile move planned by Ford was in breach of the Hart Scott Rodino Act designed to protect companies from such hostile bids. A period of 30 days had to elapse between notification and action. Conversation with Ford ceased immediately.
Talks with GM continued to the point of discussing a joint venture where a luxury car (XJ80) would be built on a GM floorplan and be built by Opel in Germany. Jaguar would be responsible for sales and distribution in the UK and the US – and everywhere else – except Europe, where GM would take over.
At a time when the US market was clearly entering a recession, the rest of the world was still a thriving marketplace. The XJ40 had earned its stripes as quality had improved and it was selling well. Almost everywhere in the world wanted the XJ-S convertible. Jaguar’s production efficiency was hugely improved and an upgraded XJ40 was on the stocks – as well as a completely new V8 model.
As had so often been a contributing factor to BL’s downfall, the pound was very strong and exports became a hard struggle yet again.
A race to takeover
Later still, the US Ford Chairman, Don Peterson, approached Egan with a firm proposal. Egan continued to strive for independence and could not see how, despite many pretty words, that the marriage could work. Philosophies were worlds apart. Jaguar had come along a hard road and was not a lame duck – the company was cutting edge in so many respects. Jaguar needed someone to work and share technologies – to strengthen both organisations. What it did not need was a new boss with preconceived ideas and a zero capacity for listening.
After the 30-day Hart Scott Rodino period had expired, all hell let loose. Shares rose from £4 to £6 in a trice; BMW offered to support Jaguar in their share option; Fiat, Renault, Mercedes-Benz and Volvo plus Chrysler all chipped in with further offers of interest.
Meanwhile, back at camp, the GM and Jaguar talks continued apace. A 50/50 joint venture was envisaged, but a number of hurdles were seemingly insurmountable. If the new car failed – it might dent GM, but crucify Jaguar. Jaguar was hellbent on getting the ‘right first time’ principles in place but what influence would they have over GM? How would the resultant car be perceived by the dealers – indeed, by the public? The worst perception would be a GM car with a Jaguar badge – even if that were a million miles from the truth. How would the workforce react to GM building Jaguars in Germany? Finally, Egan and his team had to consider the forthcoming US recession – how would it affect GM and how would that effect Jaguar?
A deal is struck with Uncle Henry
Egan needed a crystal ball – unfortunately, he didn’t have one. All he did have was a deep desire to make it as difficult as possible for Ford to buy them. The GM deal appeared to be the only one that stacked up – though not convincingly due to the concerns listed above. As the share price rose above £6.50, Egan and John Edwards flew to New York and there it was made clear that GM would not get into a bidding war with Ford and it was also clear that the GM deal would only stand up if the UK Government’s Golden Share stood up as well.
Disappointing though it was, on the trip back, the realisation dawned that the GM deal was so fraught with difficulties that it had to be ruled out.
With huge reservations, talks with Ford had to be re-opened. These had only just begun when the UK Government withdrew the Golden Share from Jaguar. Within hours, Ford’s offer of £1.6 billion was accepted and the fight was over. No real partner to work with – but a boss to work under. No real joint venture – but a hostile takeover bid. No more independence – but a need to tow the line. Egan was in his words, ‘extremely sad’…
His worst fears were manifested when it was clear within months of the takeover that Ford did not value the men or the effort. They had bought a name – that was what mattered. In the long run though, Ford did invest heavily in Jaguar – and lost billions operating it because they didn’t understand what a Jaguar was. Ford understood the dollar better than anyone else, but couldn’t spell the word passion let alone understand it.
A happy ending?
The finest hour was the XK8 (below) – although it always looked too high, it was a great car. The money trap came in the shape of the X-Type – a Ford that looked like a Jaguar.
As Egan had predicted, as soon as things got tough, Ford ditched Jaguar. In his book, Egan puts the blame for the ‘availability’ of Jaguar firmly at the foot of the UK Government in giving up the Golden Share. The issue as to whether the company would have survived the recession without the Ford ‘thing’ is open to question – and, despite lots of surmising and ‘bar room’ predictions, we’ll never actually know.
This scribe was privileged to hear Sir John speaking at Brooklands – and he is a very good speaker. On occasions he admitted he might have been wrong.
The writer was amused when a member of the audience asked Sir John what he thought of the X-Type. With a pained expression, he responded ‘The what type?’
Editor’s Note: Information compiled from various websites and the writer’s collection of motoring books including Sir John Egan’s own work, ‘Saving Jaguar’.