When Ford Motor Co. took over Jaguar Cars Ltd. 10 years ago, Ford found a company nearly in ruins. There was no product cycle plan. The only car in development was the F-Type, an overweight, underpowered concept car that Ford wasted little time in axing. Labor relations were in a mess. Manufacturing quality could not have been worse. Jaguar cars were the butt of jokes.
But no one is laughing at Jaguar today. Jaguar has been reborn.
This year, Jaguar already has smashed its previous annual sales record, having reached the 53,440-unit mark at the end of September. In the coming years, if all goes according to plan, Jaguar will sell 200,000 cars a year with four car lines. And Ford will finally reclaim its £1.6 billion purchase price ($2.5 billion at 1989 exchange rates) and its considerable investment since.
Jaguar's red ink stopped in 1995, and it was solidly in the black in 1996, according to Ford spokesman Jim Cain. Specific figures were not available.
For a while, it seemed, no one at Ford wanted anything to do with Jaguar. But good times have bred many 'saviors.'
Said Bruce Blythe, co-leader of the Ford team that negotiated to buy Jaguar: 'It would have been interesting if you had done this story five years ago. You would have found an orphan then. Now you'll find a thousand fathers.'
Automotive News Europe talked to some of the key players in the Jaguar-Ford saga. Their reminiscences follow.
On Jaguar's challenges and the luxury landscape in the late 1980s.
Former Jaguar Chairman John Egan: We had a choice in the 1980s: to keep making antiques or to create a design and development process that would allow world-class products and quality. Ford's initial aggressive takeover was premature in that we were talking to other companies. When they contacted us, we realized the game was up. We wanted to be sure we got a good price for shareholders.
Jaguar executive Mike Beasley: The issue for Jaguar in the late 1980s was not just: 'How could we refresh our products?' The issue was: 'How could we afford to refresh our products?'
Former Jaguar CEO Bill Hayden: Everybody thought the luxury market was going to boom. At Ford in the U.S.A., people will buy upmarket brands like Lincoln and Mercury. In Europe, Ford didn't have such a brand. Customers won't buy a luxury car with a Ford badge on it. So we looked at Saab for the same reason. We looked at Alfa Romeo. Ford wanted to have a top-end luxury wing. When Lexus came out and Mercedes started to push, they knew they had to do it.
Former Ford Vice President Bruce Blythe: I knew Ford probably didn't have enough staying power to build a new brand from scratch. Toyota would never tell you, but I always thought it took five years and $5 billion to create Lexus from scratch. I figured, if you could spend half that much and get a global brand and a global dealer network, I'd rather do that than start from scratch.
Jaguar had been negotiating with General Motors, which sought a 30 percent stake. Ford wanted the entire company. Jaguar initially preferred the go-slow GM approach. But when the British government suddenly relinquished its 'golden share' in Jaguar in October 1989, a mechanism designed to prevent hostile takeovers of United Kingdom companies, Ford appeared the inevitable winner.
Egan: We knew we would not be protected by the golden share. We had to try for shareholder value. It would have been wrong to hide behind the golden share. The fact we were only given 20 minutes' notice, I said at the time, was discourteous.
The very first person who came to see me was Alex Trotman (then executive vice president of Ford's North American Automotive Operations). Then the negotiations went on with me and (Ford CEO) Don Petersen. Once it went from being an aggressive takeover to an agreement, it was handed to Lindsey Halstead (chairman of Ford of Europe). By the time we had completed the purchase, Don had retired and Red Poling had taken his place.
Blythe: John Egan and John Edwards (Jaguar finance director) represented Jaguar. Lindsey Halstead and I represented Ford. We held the meetings at Ford's then offices in Grafton Street in London.
Beasley: Ford came with what we thought were some good offers for our shareholders, so we voted to accept. But it was not without some trepidation for both management and the work force. We were concerned about jobs, about pensions.
Researcher Garel Rhys: Old Jaguar shareholders, if they have any sensitivity at all, should thank John Egan for all the money he got across the Atlantic from Ford.
Jaguar's labor relations were poor. Its factories were in shambles. There was no product program in place. Ford executives were stunned when they got their first good look at Jaguar.
Hayden: I was disgusted. I could not believe my eyes. The only thing I could believe was the J.D. Power survey. It wasn't that the quality was bad. It was horrendous.
In the engine plant, Radford, on the V-12 line, they were making 300 V-12s a day, and there were a couple of thousand reject blocks and heads on the floor just piled up.
At the end of the camshaft line, they had an electronic gauge and it was not even plugged in. I said, 'It's not plugged in.' They said they had a portable hand tool plugged into the socket. So they said, 'Oh, we'll plug it in.' To their horror, the lead didn't reach.
It was horrible, absolutely terrible. Warranty and policy claims were 13 percent of revenue vs. 2 percent at Ford. We were actually having to buy cars back in the States.
(In a test for water leaks) they'd ... leave some spots unmarked. I said, 'Why aren't they marked up?' They said they couldn't fix them. So they just didn't even bother to report them. That was the mentality at the time.
The Jaguar people had a thing about airbags. They didn't believe in them. I had terrible trouble saying to them, 'You guys can fight as long as you want, but you sell a minuscule volume in the States. You're talking about a massive market. Who do you think is going to listen to your doubts about airbag legislation?'
Part of it was their products weren't designed for airbags. They were going on the philosophy they didn't have to design for it because they didn't believe in it.
Blythe: On a scale of one to 10, if we thought it was three or four, it turned out to be eight or nine on the scale of badness.
Jaguar assembly worker Terry Green: Until Ford came along, we were going downhill very fast. They kept us here in Coventry. They could have moved us to Germany. They put their money where their mouth is.
Former Jaguar CEO Nick Scheele: When I went into the industry, in 1966, it was just sickening to see the mess that (British) Leyland had made of Jaguar. There had originally been a plan to drop the name Jaguar, and change the name to the Leyland Sovereign. I'm sure more sensible heads would have prevailed, but it was scary.
One of Jaguar's biggest problems was labor relations. Hayden found factories run by the shop stewards. Management was held back by a policy of not confronting workers.
Hayden, reading from the Jaguar Transition Team Report, written in early 1990: 'Reported stoppages of work accounted for only 0.3 percent of hours lost in 1989, but this may have been because management was historically reluctant to press its view to the point of conflict.' Typical British understatement.
Green: Bosses used to walk around in suits. They didn't even know your name. If we had a problem on a job ... we'd get an engineer in here a week later. The difference now is, if we've got a problem, a supervisor phones an engineer, and I guarantee you within an hour, or at most half a day, somebody is here. Now you can approach them easily. They actually come on the track.
Jaguar production manager Malcolm Boileau: I used to spend 90 percent of my time on industrial relations. Now it's less than 1 percent.
Getting management to change its thinking also proved difficult.
Hayden: You went to the office at quarter to eight at Ford, sometimes earlier. At Jaguar, all the managers were rolling in at quarter past nine. I began calling meetings at eight to get their attention. Eventually I did, but it took a long time. Their attitude was, 'We're directors. We come in late and leave early.' I said, 'That's not the way the Ford system works.'
Despite such challenges, Hayden recognized that Jaguar had talent. He credits people like Beasley; engineers Trevor Crisp, Dave Szczupak and Nick Barter; styling chief Geoff Lawson; and U.S. sales and marketing chief Mike Dale with keeping Jaguar alive.
Hayden: They knew Ford had saved them. I got all the support I needed and none of the support I didn't need. The good guys came and helped out.
Blythe: The very people who were there when we bought the company are the ones that actually turned it around. I was particularly pleased that the Barters, the Beasleys and the Bob Dovers (then chief program engineer of XK8, now Aston Martin chairman) - the group that was acquired - were willing to learn. They took Bill Hayden's criticism.
Jaguar Managing Director Jonathan Browning: These were the people who went through the British Leyland days, the John Egan days. These were the people who were labeled with being responsible for a lot of the problems Ford inherited. These are the same folks who have driven the transformation of this company.
Under Ford, Jaguar began putting a product development program in place. But then came the recession of the early 1990s.
Scheele: The market drop-off in the 1991-92 period was a major hit for Jaguar. Volumes dropped from 49,000 in 1988 to 20,000 in 1992. And sterling went up against the dollar. The combination was just devastating to profits. By that stage it had become clear there were some problems with XJ40 which absolutely needed fixing.
We had to tackle the quality problem and had to get some costs out of the business to survive. That delayed the third program. In hindsight, that was great because had we tried to launch a third car line as soon as the acquisition had taken place, it could not have succeeded.
Those were terrible, terrible years. We started losing money at the rate of more than $1 million a day. We were losing better than 25 to 30 percent on turnover. We were losing our shirt. The real issue was, could we ever get the thing turned around? We had already reduced the size of the company by half. In April 1992, we approved funding for the new engine. We approved what became X300 (the revised XJ). We really bet the whole company on that sedan being a home run from day one.
Jim Padilla (loaned by Ford to Jaguar as director of engineering and manufacturing) pored over the X300 and worked with the engineers and manufacturing guys to make sure it was designed for quality, designed for manufacture. He had driven that together with Mike Beasley and (chief engineer) Clive Ennos.
Has Ford made back the money it has spent on Jaguar?
Rhys: No, no. Nothing like it. Even with the most ambitious production runs, you would look at 2010 before Ford was paid back its (investment). They spent £1.6 billion to buy the company and incurred over £1 billion on losses and spent £1 billion on new cars.
Scheele: I know, so I can't tell you. It will be viewed as one of the best acquisitions in the auto business ultimately. There's no question.
Blythe: They've got three car lines on the road but four car lines of cost. Once you get a fourth car line on the road and four car lines of revenue, that's when Ford will get back the purchase price and investment.
There were several key moments that signaled Jaguar's comeback.
Scheele: One was in May 1992 when we got the U.S. dealer body over to Coventry and showed them the future. We took the Lincoln Red Carpet lease program and modified it for Jaguar. That was the first turning point, because the dealers could have walked.
We finished 1992 just selling 8,000 cars in the U.S.A. But the dealers didn't walk. They were enthusiastic about the future, and they believed we were going to fix the quality problems. Our chief engineer, Clive Ennos, had immense credibility with the dealers. We had also added Jim Padilla, later in 1992. Jim won tremendous credibility with dealers because of his commitments to improving manufacturing, engineering and, above all, the quality.
Another issue was the commitment to the Jaguar V-8 engine. That was a huge commitment. At the time, in April 1992 when I went to the board for the money for the engine, there was a lot of skepticism. 'Why does Jaguar need its own unique engine? What's wrong with the (Ford) Romeo V-8, which is a superb engine?' The commitment that Ford management and the board showed was remarkable. That sent a whole signal to Jaguar people throughout the company and around the world that Ford was deadly serious about keeping Jaguar unique.
Despite Jaguar's need for Ford's resources, Ford and Jaguar executives say Ford has managed to preserve Jaguar's independence and unique culture.
Scheele: Most companies, when they take over other companies, try to impose their own culture. Ford never tried to do that, which is really a testimony to some pretty far-thinking people.
Blythe: Bill Ford Sr. called and said, 'I'm really glad we bought Jaguar because I've driven Jaguars since I was in college, but I've never been able to bring them into the office.' Bill Ford Sr. has always been kind of the overall protector within the hierarchy of Ford of allowing Jaguar to develop on its own - to make sure its image was its own, to make sure everything you saw and touched and felt said Jaguar.
Under the global Ford 2000 program, a Jaguar product, the S-Type, was developed side by side along with another product, the Lincoln LS. The new 'baby Jaguar,' known internally as X400, will also share a Ford platform.
Scheele: We benefited enormously from Ford 2000. It gave us access to the S-Type. It gave us access to a lot of the capability through the linked engineering. That's still a major plus for Jaguar, which it otherwise could never have enjoyed. There were some people who would have liked to have seen Jaguar functions reporting into (Ford) global functions. Of course, they never did. Had Jaguar not maintained its role as a separate business unit, we would have risked losing the Jaguar culture.
Jaguar has two leaders as it heads into the 21st century. Wolfgang Reitzle holds the title of chairman in his capacity as chairman of Ford's Premier Automotive Group. Jonathan Browning is managing director.
Blythe: When Bill Hayden went in, quality and productivity were the priorities. If you didn't fix those, you weren't credible. You then needed someone to come and be a calming influence and move the organization into a position to use the best of Ford's toolkit. Nick Scheele was perfect for that job.
Now that the new, smaller Jaguar is coming out, you need to do enhancements to the existing lineup. I think Wolfgang Reitzle, who has had years of experience doing that at BMW, is exactly the right person. Exactly the right person in the right sequence. Browning's strong marketing background is going to complement Reitzle's strong product background.
Browning: The first 10 years were about fixing the fundamentals and transforming the company to get the foundation for growth in place. The next 10 years are all about fulfilling the potential of Jaguar in the global marketplace.