Jaguar Cars – Impressive new XJ product launch but…

Posted on 13 Jul 2009 by The Manufacturer

Howard Wheeldon of BGC Partners blogs on Jaguar's fortunes - past, present and future - following the launch of the new XJ

XF in 2008, XJ in 2009 – two cars that between them will probably define the future success and viability of Jaguar Cars. Leave aside weak or non existent markets, future funding and various Tata and Jaguar Land Rover loan issues for a moment and look to the future, as it might well be when we have worked ourselves through the current global economic mess.

If – and it is a big if – Jaguar has got its manufacturing and quality processes right and if the pricing is right then this is a company that can do well. By all accounts, the launch of the new XJ Sedan last week went down very well, though of course it will be early 2010 before we see the first examples of the car on the road and can then see whether initial buyers are content with what they have bought. Even so, if the XJ can repeat the initial success of the XF that was launched just a year ago we should better believe that Jaguar’s share of premium market product could significantly rise.

The new Jaguar XJ, unveiled at a lavish event at the Saatchi Gallery in Chelsea last Thursday

It may be hard to imagine that given the current weak state of the market that Jaguar under its new owner Tata might still be able to take on the rest of the premium road and succeed. But don’t rule the idea out. Yes, I know we have lived with that promise for years, particularly through the miserable late eighties period following Jaguar’s short honeymoon as the Thatcher privatisation star.

Just to remind – fearing that Jaguar might become the potential 1992 election embarrassment, then Prime Minister Margaret Thatcher negotiated a deal that caused the government’s golden share to be dropped eighteen months earlier than planned and Jaguar to be sold to Ford. Thus, much to the disgust of then Jaguar CEO Sir John Egan, the company lost its much valued if short lived second bout of independence. But, to be fair, it wasn’t Mrs Thatcher that allowed the company to get into such a mess. True also that having paid a fortune for Jaguar much market share and sales development was expected from Ford. But, sadly, it never materialised. Nevertheless, Ford left Jaguar in a very much better state than they found it – they invested heavily in new plant at Castle Bromwich and Halewood and they did something that an independently owned Jaguar could never have done – they closed Browns Lane – Jaguar’s manufacturing Achilles’ heel!

For the first time since the original XJ and equivalent upmarket Daimler Sovereign series cars were launched in 1968, the new XJ Jaguar has, it seems, gone completely back to the drawing board to design a replacement for its primary sedan. On the face of it the car incorporates virtually nothing from its predecessor, save the name. The initial launch photo that the company has come up with certainly looks great – a car that is as sleek as it is as unlike any Jaguar that has gone before it. And yet it is certainly worthy of being termed a Jaguar. I have no idea what Jaguar founder – the late Sir William Lyons – would actually think of the car but, knowing the man, I guess that he would probably be pleased.

‘Grace, space, pace’ was a slogan used to describe the predecessor to the original XJ car – the old Mark 10. From a photographer’s angle, the new XJ can hardly claim to have what the old Mark 10 had from a side view but, nevertheless, it still has considerable charm in terms of looks.

But what about underneath the bonnet? I’ll leave the likes of Jeremy Clarkson to better describe the inner mechanics, as they compare to competitor products from Mercedes Benz, BMW and the like. There’s the rub though – pretty well all Jaguar cars have enjoyed good looks in the past – even the various revamps of the XJ over the years that certain previous Jaguar chiefs tried to pass off as completely new cars! But what has let Jaguar down increasingly in the past forty years until more recently boiled down to: too many different owners; poor quality production and technique during the eighties and nineties together with having inadequate if not completely inept manufacturing facilities; inconsistent levels of sales and growth; a very poor record of profitability; and a propensity of failure to invest. Though it saddens me to say it, Jaguar’s relatively poor management through the 1980’s came to believe far too much in its own marketing hype. The bottom line was that quality and reliability was frankly appalling and arguably remained so for a few more years following the 1989 acquisition by Ford.

The Jaguar XF, launched last year

Ford of course is now a mere chapter of Jaguar history though nevertheless it should remain to be seen as a very important one. Ford may not have been perfect, it may have made the odd strategic mistake on Jaguar, particularly in attempting to take the company downmarket, but without Ford it may be right to say that Jaguar could have fallen along the wayside years ago.

The future is now about Tata though. It is about future investment and, moreover, growth in international sales. And while it may well be two or three years before Jaguar brand sales in markets such as the US and Europe get back to where they were, let alone increase due to the benefit of having new and exciting models such as the XJ and XF, that shouldn’t stop the company developing new markets in India and further developing sales to China, Japan and even Russia. Right now no one should be in any doubt that Tata remains solidly behind Jaguar and separately Land Rover too. Despite being rebuffed by the UK government in terms of the entitlement the company has to receive EIB development loans, there are no plans to take production away from the UK. Thus, while Jaguar may be forced to become temporarily smaller as lay off’s become the order of the day, I fully believe that Jaguar potentially has an excellent future when the market returns. The new XJ is a reflection of that belief – pity though that presumably, because it is a nasty manufacturing company and foreign owned, this is not a view shared by Lord Mandelson and his cronies at BERR. Shame on them. Shame too for the UK economy and jobs.

By Howard Wheeldon, senior strategist at BCG Partners, the global brokers firm