With Aston Gone, Jaguar Gets Another Shot
April 23, 2007

By Mark Bursa

The sale of Aston Martin has gone a long way toward clearing up the brand confusion within Ford’s Premier Auto Group.

About time, too. The muddled mass of British luxury nameplates, created by former Ford CEO Jac Nasser in 1999, has singularly failed to present a serious challenge to BMW, Mercedes-Benz and Audi. And it’s been a drain on Ford, largely because it includes the financial black hole that is Jaguar.

So selling Aston to a wealthy consortium headed by respected British motorsports figure David Richards is both a good deal for Ford, which gains a useful $848 million windfall, and good for Aston, which departs PAG with a stable of modern cars and the technological resources, via Richards’ Prodrive organization, to keep on growing.

And it just might turn out to be the best result for Jaguar, too, giving the brand some clear direction at last.

Jaguar: Hemmed in by Aston, Volvo

Ford paid $2.5 billion for Jaguar in 1989 –- a price that at the time was said to be five times greater than the company’s value. Since then Ford has poured further billions into Jaguar. The aim was to tackle BMW and Mercedes head-on, pitching “British luxury” as an alternative to “German luxury.”

But the products have not been up to the task. Wrong decisions have been made.

The demands of Jaguar’s American sales and marketing department created cars like the woolly-handling S-Type, based on the Lincoln LS platform. Jaguar’s designers accuse “fuddy-duddy directors” of insisting on retro styling.

In a bid to increase volume to 300,000 and appease British trade unions, a Ford plant near Liverpool that was earmarked for closure was converted to produce the Mondeo-based X-Type. But the X-Type has never hit its sales targets. Bolting a retro-styled body on to the running gear of a mass-market sedan just wasn’t good enough to compete against sophisticated German rivals.

Then there’s the XJ, with its radical and expensive aluminum body shell. But its conservative styling makes it difficult to tell it from the old model.

And it took 10 years to replace the old XK coupe with a new model. In the same time frame, Jaguar’s German rivals have broadened their model offerings beyond belief -– Audi has gone from six models to 24, with more to come. Jaguar still has just four models. Mercedes has that many coupes.

The penny dropped a while ago. The concept of “British luxury,” all burled walnut and cream leather interiors, works fine at the super-luxury Rolls-Royce or Bentley end of the market but it lacks the mass-market appeal of “German luxury” –- black leather and brushed aluminum -- for the same reason, you see smart businessmen wearing Hugo Boss suits rather than Harris Tweed jackets. Belatedly, Jaguar added a black leather and brushed aluminum interior option in the new XK last year.

In any case, Ford acquired a more potent BMW-fighter in 2000 -– Volvo. And “Swedish luxury” is increasingly understood as a concept -– just look at the success of Ikea, with its pale woods and subtle colors. Volvo is becoming a serious alternative to the Germans in a way that Jaguar could not.

This left Jaguar squeezed, hemmed in by Aston Martin above it and Volvo below, while fellow PAG brand Land Rover was the designated SUV-maker, denying Jaguar access to another lucrative sector.

Jaguar Sales Plummet

All the while, sales and production have plummeted. Production has dipped to around 90,000 –- putting Jaguar in Porsche territory rather than BMW or Audi in terms of sales. And Porsche, more than any other manufacturer, defines the possible future for Jaguar -– lower volumes, more expensive cars, and higher profitability.

“Over the last five years, Jaguar’s U.S. sales have been shrinking fast,” notes Alex Rosten, analyst for Edmunds.com’s AutoObserver.

Jaguar’s sales in the U.S. dropped 35 percent from 2005 to 2006. From 2002 to 2006, the total drop was a stunning 66 percent. “To put things in perspective,” adds Rosten, “some megadealerships, like Longo Toyota in El Monte, California, sell more vehicles in a year than all Jaguar dealerships combined.”

Jaguar Performance
Year	Make	Total Volume	Market Share	TCI	Days To Turn
2002	Jaguar	61,204	0.4%	2,841	73
2003	Jaguar	54,481	0.3%	3,350	62
2004	Jaguar	45,875	0.3%	4,151	88
2005	Jaguar	30,424	0.2%	5,369	87
2006	Jaguar	20,683	0.1%	6,600	98
2007	Jaguar	4,248	0.1%	4,467	98

Source: Edmunds.com

To spur slow sales last year, Jaguar applied aggressive –- and expensive –- incentives largely in the form of heavily subsidized leases. Jaguar’s Total Cost of Incentives, as calculated by Edmunds.com’s, averaged a stunning $6,600 per vehicle. In fact, Jaguar had the highest incentive spending in the industry -– $1,054 more per unit than the next highest brand, another Ford marque –- Lincoln.

Despite the incentives, Jaguar had the second highest inventory numbers, measured by Edmunds.com as 98 days to turn, the second highest level of any brand except Isuzu.

“Jaguar has been the victim of Ford’s poor production planning and directionless message,” says Rosten.

		Total Volume
Make	Model	2005	2006	% Chg
Jaguar	S-Type	8,306	5,503	-33.7%
Jaguar	S-Type R	591	372	-37.1%
Jaguar	XJR	626	346	-44.7%
Jaguar	XJ-Series	7,678	4,681	-39.0%
Jaguar	XKR	707	1,071	51.5%
Jaguar	XK-Series	1,575	3,496	122.0%
Jaguar	X-Type	10,941	5,214	-52.3%
Total		36,677	22,689	-38.1%

2007 sales through February
Source: Edmunds.com

		YTD Total Volume
Make	Model	2006	2007	% Chg
Jaguar	S-Type	1,720	1,065	-38.1%
Jaguar	S-Type R	129	n/a	n/a
Jaguar	XJR	137	28	-79.6%
Jaguar	XJ-Series	1,243	1,104	-11.2%
Jaguar	XKR	131	n/a	n/a
Jaguar	XK-Series	335	1,251	273.4%
Jaguar	X-Type	1,429	800	-44.0
Total		5,124	4,248	-17.1%

Source: Edmunds.com

A Glimmer of Hope?

But now, with Aston gone, there is perhaps at last a glimmer of light for Jaguar.

At the Detroit auto show in January, Jaguar unveiled the C-XF concept, which hints at the future XF production model -- a car Jaguar believes will build its new future. The XF will be produced from early 2008, replacing the S-Type. And it looks like Ford’s new CEO Alan Mulally is prepared to give Jaguar one last chance, stating: “Jaguar is not for sale at this time.”

Designed jointly by Jaguar design director Ian Callum and advanced design studio boss Julian Thompson, the XF is the sort of car Jaguar should have been making for some time. It represents a break from the retro styling of the XJ, S-Type and X-Type models, using subtle design cues to create a new look for the struggling brand.

Callum said the car’s styling was certainly not retro, but the concept was: “Sport sedans were Jaguar’s mantle with cars such as the Mk2 and Series 1 XJ of the 1960s -– and we’re having it back!”

Inside, the car features a very different take on Jaguar’s traditional wood-and-leather finish. The materials are there, but the wood has been scorched black, while the leather has been treated to look like carbon fiber.

The XF is the first of a series of new cars under development that will see all three Jaguar sedans replaced by the end of the decade. “Our future is even more exciting than the XF,” said Callum.

A new XJ –- apparently even more radical than the XF –- will follow in 2009, while the rumored Land Rover Freelander-based crossover vehicle to replace X-Type is still coming, said Jaguar executives at the show. If Jaguar gets this right, it could be Jaguar’s "Porsche Cayenne."

By the time it arrives, more than 20 years will have passed since Ford bosses walked into Jaguar’s now-demolished factory in Coventry. Until then, Jaguar has the problem of keeping sales of its flagging sedan models going. The XJ has already received a racy face-lift, and you can expect much of the sales effort in the next two years to concentrate on Jaguar’s one hit model, the XK. Still some pain before any gain.

There are still dissenting voices who say Mulally should sell Jaguar and even Land Rover. But buyers aren’t exactly forming an orderly line. Land Rover and Volvo should help PAG move into profit this year, and that should persuade him that Jaguar’s worth persevering with for a little longer. Perhaps there will be something to celebrate on that 20th anniversary in 2009.

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