The new Jaguar XK's main job is to is ratchet up some excitement for the brand, which sold only 82,000 cars worldwide last year.
Neil Winton/ Detroit News
Photo from Global Auto Index
Wounded Jaguar looks like it's hanging on
New XK sports car will raise Jaguar's profile, but does Ford really want to keep this storied brand?
CHIPPING CAMPDEN, England -- Jaguar has slid perilously close to the financial precipice again but thanks to another bailout from Ford, has managed to avert disaster, for now.
The new XK coupe and roadster, launched recently at this beautiful town here in the heart of the English Cotswolds, is meant to signal the path to recovery for this lame but storied brand.
But the XK is unlikely to achieve much for Jaguar; after all it will only manage annual sales of about 10,000. Its job is to raise awareness, and ratchet up some excitement for Jaguar cars. A measure of the task ahead is Jaguar's rocky looking balance sheet. It lost $750 million in 2004, and in November last year, parent company Ford gritted its teeth and stumped up about $2 billion to keep the company afloat.
Ford bought Jaguar for $2.5 billion in 1989, hoping to follow the paths of companies like Germany's BMW and later Toyota's Lexus of Japan, and capture sales in the luxury sector and make big bucks.
But products have failed and Jaguar's ramshackle organization didn't help.
"Jaguar has come through a very great crisis, with a bit of a mismatch as to where they thought they'd be and where they are now," said Krish Bhaskar, who heads the Motor Industry Research Unit (MIRU) based in Nice, France.
Some estimates put total losses at total nearly $10 billion, including the purchase price since 1989. Rumours are rife that Ford is anxious to sell the company. Renault and Peugeot of France, both mass car manufacturers with premium sector pretensions, have been mentioned as potential buyers. Ford officials claim Jaguar is not for sale.
The theory was fine in the late '80s. Jaguar had a racing pedigree and impressive history of making beautiful, glamorous and technically advanced machines loved by petrol heads. It reached a peak with the magnificent E-type from 1961 to 1971. The E-type was not only breathtakingly beautiful, it was relatively affordable, and provided the kind of aura only reached by much more expensive cars like Ferrari.
Pricey, dull, stodgy
But Jaguar lost its nerve, producing a series of pricey, dull and stodgy machines, which also became a byword for poor quality. Perhaps the most amazing fact about Jaguar, and a tribute to its magnificent past, is that it managed to survive at all.
Ford has also presided over a series of missteps. The latest top-of-the range XJ looks bland and although a fabulous product in many ways, is struggling in the market place. The mid-range S-type is also visually challenged, looking a bit too overweight and smug. Both vehicles were late offering diesel engines - a must in Europe where diesel sales account for about 50 percent of all sales.
The last error was the attempt to enter the compact executive segment dominated by BMW's 3-Series. The product chosen for this mission impossible was the X-Type, and during the hype and bluster generated during its launch back in 2001, Jaguar talked about X-type sales reaching 150,000 year with overall sales reaching 200,000 a year, maybe even 300,000. The X-Type, which used many of the components from the Ford Mondeo family sedan, doesn't look like it will be renewed when production is ended around 2010. Jaguar produced about 45,000 X-Types in 2005, with sales peaking at about 50,000 in 2003.
In the event, overall Jaguar sales reached a high of 126,000 in 2003, and have been on the slide ever since. Last year's 82,000 looks like the trough, fingers crossed.
Devastated by dollar fall
In mitigation, Jaguar was devastated by the fall in the dollar against the euro. MIRU points out that although BMW and Mercedes were also hurt by the dollar's fall, their strategy of building some cars in the U.S. helped stem the pain. Less than 25 percent of BMW's output is sold in the U.S., around 15 percent of Mercedes products are sold there, but nearly 50 percent of Jaguar's production was sold in the U.S. in 2005. If Jaguar is to be permanently stabilized, MIRU's Bhaskar says some output should be moved to the U.S.
Ford officials are coy about the possibility of profits returning to Jaguar, and the end of red ink. The cherished black stuff was supposed to show up in 2007, but now 2008 could come and go without profits, according to Ford.
But if a revival is to be ignited, job one is to forget the retro look and make the product look modern and exciting.
"The XJ has been a complete flop. It's a great product but the styling was too much like the old one", said Colin Couchman, analyst for London-based forecaster Global Insight. "In the future Jaguar has got to be more forward looking, more forthright in styling like true Jaguars. That's what it used to stand for; the E-type, etc. and the XJS in the 1970s were quite radical, not just old men's cars."
Couchman does give Jaguar credit for some achievements. Quality has been turned around - last year Jaguar topped the J.D.Power Sales Satisfaction Index in the U.S. for the second year in a row, edging out second-place Lexus, and Buick and Porsche in joint third.
"Ford has been very patient and done quite well. It's turned around the manufacturing base and quality. There are very satisfied Jaguar buyers out there, there just aren't that many of them. Ford has tackled elements of profitability, that will help, and merged backroom stuff with Land Rover," said Couchman.
Jaguar, with SUV maker Land Rover, Volvo of Sweden and upmarket sports car maker Aston Martin, form Ford's Premier Automotive Group. Jaguar and Land Rover will shortly be sharing some production at the Halewood, Liverpool plant which currently makes the X-Type.
S-Type must succeed
"The S-Type is the make-or-break product when it's unveiled late next year," Couchman said.
The S-Type competes against the BMW 5-Series, Mercedes E-class, Audi A6, and Lexus GS.
The Motor Industry Research Unit's Bhaskar agrees.
"The next generation S-Type will be a defining car for Jaguar. It will have to be much more radically styled but also conventionally pretty. So think in terms of the Mercedes CLS, rather than the Mercedes E-Class or BMW 5-Series. This will also be Jaguar's entry level saloon," Bhaskar said.
Bhaskar reckons that Jaguar will be forced to drop the current X-Type, in favour of a so-called X-Type crossover, which will be bigger, more expensive, and more profitable than the current model, and more like the Lexus RX-300. Jaguar might also produce an S-Type crossover, along the lines of the Mercedes R class.
Bhaskar wonders whether Ford is truly committed to Jaguar's future.
"Ford is unsure what to do with Jaguar. It has talked to Renault, Peugeot too when they were discussing the diesel engine and joint projects, but Peugeot walked away," he said.
Ford and Peugeot jointly produce a V-6 diesel engine which powers versions of the Jaguar S-Type and XJ, and the Land Rover Discovery and Range Rover Sport.
"If Peugeot or Renault came back and sought a joint venture, (Ford would) do it," said Bhaskar.
Bhaskar believes Jaguar will survive, but doesn't see much likelihood of the glory days volume estimates coming to pass, with sales hitting 120,000 by 2010, if it goes for the X-Type crossover.
Professor Ferdinand Dudenhoeffer, managing director of Bochum, Germany-based automotive analysts B&D Forecast, is even more pessimistic.
"The future won't be easy for Jaguar. I think they'll try to find break-even around 80,000 cars (a year). I'm not sure whether they will come back with a new X-Type in 2008 or 2009. In Ford's current situation it makes sense to restrict investments in Jaguar and concentrate on the S-Type, XJ and XK Sports. Instead of going down to the BMW 3-Series with cars like the X-Type, it seems to be more economical to come with kind of sports cars on the S-Type platform," Dudenhoeffer said.
Sales similar to Porsche's
"So, the future is a big challenge for Jaguar. However, it must be possible to make the business profitable on smaller volumes and a downsized model-range," he said.
Dudenhoeffer expects Jaguar to sell around 10,000 XKs a year.
It is a sobering thought for Ford that Jaguar's current output of around 80,000 is very close to Porsche's, the world's most profitable car maker.
So how good is the new car?
The new XK will be available as a coupe or convertible when it goes on sale in Europe and the U.S. this spring. It looks good, but not that good. Don't forget it has to compete with cars like the Mercedes Benz SL500, BMW 650i, and Porsche 911.
Unfortunately for Jaguar, its design has been hampered by new European Union safety legislation which insists that extra precautions are taken to try to mitigate the damage done to pedestrians in car accidents. This has led to the installation of the Pyrotechnic Pedestrian Deployable Bonnet no less, which forces the XK's bonnet to pop up a few inches if the car hits a pedestrian, to create a cushioning effect and lessen the impact of the engine.
This is good news for anyone unfortunate enough to be hit by a Jaguar, but explains why the XK looks a bit fatter in the face than the designers would like.
The XK coupe and convertible are priced here in Britain at close to $100,000 and are powered by a 300 bhp 4.2 litre V8 engine, with a six-speed automatic gearbox which incorporates a paddle-shift manual override, like Formula One cars.
The car, which is constructed using lighter, stronger aluminium like the XJ flagship, sprints from a standstill to 62 mph in 5.9 seconds. It is bigger than the car it replaces, and provides a much more comfortable, roomy interior, although the seats in the back are really useless. Top speed is limited to 155 mph. Later this year there will be a cheaper 3.5 litre model, and by the end of the year, a hot XKR. In 2007, expect a V-8 diesel-powered XK.
The car that I drove around the Cotswolds had a couple of worrying faults. A new system designed to let the passengers hear a muted version of the car's magnificent V-8 howl didn't work, and instead transmitted the sound of angry wasps from the glove locker when the car hit 70 mph. Toward the end of the drive, "Engine Systems Fault" appeared on the control panel, although this didn't lead to any obvious problems. Another journalist complained of an ABS and traction control failure. Teething troubles surely.
XK should do ok
Global Insight's Couchman expects the XK to "do OK" and sell around 11,000 a year. Jaguar should survive and he is a little more positive than B&D's Dudenhoeffer, seeing total volume of around 95,000 by 2010.
So where does this leave Jaguar, a company that let it be known that it would be selling maybe 300,000 cars a year by now, and which is actually selling about 80,000.
"Think of BMW at an early stage of development in the 1970s and 1980s, when it was playing catch up with Mercedes," said Couchman.
BMW overhauled Mercedes last year as the world's biggest premium car manufacturer, and produced more than 1.3 million vehicles.
That shows it is possible. If Jaguar can do just a bit better than BMW, it will be the world's biggest luxury manufacturer by, say, 2031. You read it here first.