Tough Times Ahead for Jaguar

With the closure of its Coventry based Jaguar plant scheduled for next September, Ford will shed 1100 jobs and the massive cash injections it has ploughed into trying to revive the brand. Jaguar has seen disappointing sales this year, its performance led to production cuts of 15,000 this year and its negative impact on the Ford group was realised through an unexpectedly high loss of £201 million in the second quarter.

The British brand has been hampered by falling global sales, especially in America, excess factory capacity and uncompetitive operating costs. The decision was not unexpected and the closure of the Brown’s Lane assembly line, which builds the XK sports coupe and XJ luxury saloon was based on the logic that producing 125,000 cars a year at three different factories was inefficient and costly. Foreseen or not, the restructuring is another blow to the British auto industry and one of its prestigious brands.

“Jaguar is currently turning out about 120,000 vehicles a year at three plants,” said analyst David Healy of Burnham Securities. “That’s about half the capacity of one full-size plant in the United States,” where its sales are down 11.5 per cent this year.

Understandably improving Jaguar’s financial performance has become a major priority for Ford, as its four luxury brands, with help from its Lincoln brand, are expected to contribute one-third of the manufacturers $7 billion pre-tax profit target by 2006. Despite the cost cutting measures Jaguar still faces a long struggle and has now abandoned its target of producing 200,000 models a year and is aiming to stabilise sales at the current level of 125,000.