Jaguar Lands On Its Feet Again
The British maker of speedy and stylish cars lives another life as Ford sells its luxury marque to an Indian company known for autos aimed at the middle class
Paul A. Eisenstein
From the Print Edition:
Kevin Costner, July/August 2008
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By 1989, when Ford finally took the keys to the Coventry operation, things suddenly looked quite different from what people expected, recalls Allan Gilmour, Ford's former vice chairman and chief financial officer. The factory was a nightmare needing a quick and complete renovation. And while it was clear that Jaguar had a wonderful image when it came to design, its reputation for poor quality was a disaster that would prove difficult to reverse.
Still, Ford was in it for the long haul, and no one seemed more convinced of Jaguar's potential than Jacques Nasser, who became the U.S. automaker's CEO in 1999. Though he was often called Jac the Knife for his willingness to slash budgets, Nasser could also be surprisingly free with the checkbook. Nowhere was that more apparent than with the Premier Automotive Group, which Nasser cobbled together from an assortment of import and domestic brands, including Jaguar and the even more upmarket British luxury marque Aston Martin. Nasser rounded out the group with Sweden's Volvo, which he bought for $6.45 billion, and Land Rover, which he got for $2.7 billion.
Land Rover was another dusty relic of the English automotive past, but by the time Nasser made his offer, the company was in turmoil. Originally part of the larger Rover Group, the United Kingdom's biggest homegrown carmaker, it was acquired in 1994 by BMW AG. But that deal proved another match made in hell, and by the end of the decade, the Germans were desperate to get rid of their British albatross. In the third month of the new millennium, Rover's passenger car operations were effectively given away to a British investment group—which quickly failed—then sold to a pair of Chinese upstarts. Ford gobbled up Rover's truck side.
It seemed like a brilliant idea at the time. After all, with cheap and plentiful fuel, American motorists were snapping up sport-utility vehicles in record numbers. And while Land Rover, like Jaguar, had a long-standing problem with quality, the brand had a carefully cultivated image as the manufacturer of the ultimate in SUVs.
To manage the new network of luxury brands, Ford pulled off another coup, signing up Wolfgang Reitzle, BMW's longtime, highly regarded product development czar. With a hotline to Nasser and a seemingly unlimited budget, the German executive started moving fast, setting in motion a series of product programs that were aimed at making Ford Motor Co. the world's dominant luxury vehicle manufacturer. At a time when Ford seemed well positioned to push past GM in the global sales sweepstakes, Nasser's team was forecasting that the collective Premier Automotive Group would soon account for a whopping one third of Ford's total profits.
But neither Reitzle nor Nasser calculated into their equations the peculiar internal politics of the U.S. automaker. Even the CEO didn't have the sort of functional authority that could bring the company's various fiefs into line, recalls a former Ford executive. Now a senior vice president with another global luxury-car contender, he laments that "there were plenty of people willing to sabotage the PAG." Notably, those working for Ford's original luxury brand, Lincoln, which Reitzle had intended to marginalize, perhaps even abandon. Increasingly frustrated, the German executive tendered his resignation. And then, following the catastrophic Ford-Firestone tire fiasco, Nasser himself was driven from the company.
It may not have been obvious, at least not yet, but the clock was ticking down for the Premier Automotive Group. Those who didn't catch the subtle signs didn't need an interpreter once Alan Mulally came onboard a fast-failing Ford, in the autumn of 2006. His mission was simple to define: "back to basics." That meant, first of all, making some money at a company that was plunging deeper and deeper into the red. It wasn't going to be easy, the former Boeing executive quickly realized. One of the things it would require was getting management focused. Corporate politics aside, the PAG was, to Mulally, a major distraction for his new management team. It had to go.
Aston was first. The ultra-luxury maker had made a dramatic turnaround under Ford and was solidly in the black, with new models, such as the V8 Vantage, rolling out and sales growing by the day. It was snapped up by a team of Kuwaiti investors and the head of Aston's racing team.
Some thought Jaguar and Land Rover might pose a more difficult sales job. With their design, engineering and manufacturing operations tightly intertwined, they could only go as a pair. The truck brand was in reasonably good shape, and despite the run-up in fuel prices, still seemed to boast plenty of potential. But the carmaker was in serious trouble, with sales just a fraction of what Nasser and Reitzle had been forecasting just a few years before. Yet a closer inspection suggested the situation wasn't quite as dire as media reports were making it out to be.
For one thing, most of the heavy lifting had already been done. While Ford officials decline to provide hard numbers, various analysts estimate that over the years the maker had sunk as much as $30 billion or more into Jaguar and Land Rover. And a chunk of that was finally in position to pay off, ironically, just as Mulally announced plans to put the pair of marques on the auction block. Jaguar was rolling out its all-new XK sports car, and to generally favorable reviews. That was to be followed by the XF, the replacement for the S-Type, the largely unloved midsize saloon, or sedan, car. "It looks like Ford has sold them off just as everything is getting turned around," says George Peterson, founder of AutoPacific, a California-based automotive research and consulting firm.
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