Jaguar Land Rover thriving under Tata -- so far

By late 2013, Wolfgang Ziebart had a sensible plan for supplying the electric motors that would drive the I-Pace, a sleek battery-powered crossover Jaguar was developing to challenge Tesla's Model X.

It was a no-brainer to outsource the motors, thought Ziebart, then Jaguar's engineering director. What else was there to do? Electric motors were outside the design and manufacturing expertise of almost every automaker in the world.

But one team member on the project, a boyish electrical engineer named Alex Michaelides, had a nervy idea. He asked to meet with Ziebart, an eminent German engineer who had been BMW's global product-development czar. Michaelides told Ziebart he wanted a chance to design the crossover's twin motors himself.

Ziebart listened to Michaelides' proposal for a compact, lightweight motor that would deliver sizzling performance. The driveshafts running through the motor were different from anything available from suppliers.

Beyond intrigued, Ziebart gave Michaelides on-the-spot approval to start working on his motor. Within a year, the first prototypes were spinning on a dynamometer, and Jaguar Land Rover was on its way to being one of the few automakers to design its own patented electric motors. The I-Pace, with a 250-mile range, is slated to arrive at dealerships this summer.

"The decision was basically made already to buy the motors from the outside, then this guy showed up in my office," Ziebart said. "So, now we have this motor. It's not the cheapest, but it's the best in the field."

It was the kind of gut-level decision that likely wouldn't have happened under any of Jaguar or Land Rover's previous corporate parents: British Leyland/Rover Group, British Aerospace, BMW and Ford, which sold the brands to Tata 10 years ago this week.

Few thought the Ford-Tata deal for JLR was a good idea. The sale price was many billions less than Ford had invested. Tata, best known for a $1,500 microcar called the Nano, had no experience running a global luxury automaker. Worse, Tata had no technology that could be leveraged to offset JLR's product development costs.

And there were fears in Britain that the country's battered auto industry — fresh off the 2005 collapse of MG Rover — would take another hit if Tata moved Jaguar and Land Rover production to India.

JLR's first 18 months under Tata were difficult. Ford had a nearly complete business plan in place for Jaguar and Land Rover when the brands were sold. Several key new products, such as the Jaguar XJ, were funded and near launch. But the recession had not only choked off car sales, but also JLR's access to credit.

Under Tata, JLR was for the first time responsible for its own money — and the new company needed plenty of it. JLR's prospects looked bleak when it couldn't negotiate a suitable deal for access to credit.

JLR posted a loss of about $540 million in its 2008-09 fiscal year, forcing Tata to inject $1.2 billion more into JLR to keep the company on course to fulfilling Chairman Ratan Tata's promise to continue implementing the business plan Ford had developed.

"It was really a tough time, the most difficult recession in human memory," JLR CEO Ralf Speth told Automotive News in March. "When we started to develop our [product] strategy, Ratan Tata said, 'Keep on this path,' and he gave us the resources to do it."

Ford, which bought publicly held Jaguar in 1989 and Land Rover from BMW in 2000, had started integrating the two brands well before the Tata sale, but that messy job was not yet finished in early June 2008.

Al Kammerer, JLR's product development chief under Ford, recalls the situation with suppliers. Legacy issues — dating to Rover Group and its tie-up with Honda — and a dearth of shared parts between Jaguar's luxury cars and Land Rover's off-road vehicles made JLR's purchasing inefficient.

"The sourcing for the Land Rover Freelander was originally done under Honda," Kammerer said. "The big Range Rover was done under BMW. The Defender has been around forever. The Discovery got Ford's supply base. Jaguar was using Ford suppliers. There was a major initiative across all car lines to get to a significantly common supply base."

Under the terms of the sale, Ford continued to supply engines and body stampings to JLR. But it came time for the company to develop its own product plan based on its own architectures — without a corporate benefactor's parts bin to save money and product development time.

That Tata had no technology suitable for Jaguar or Land Rover was fine with Bob Joyce, who headed product development from 2008 through 2016. Joyce, who spent five years at BMW before joining JLR, had plenty of faith in the small core of engineers who remained with Jaguar and Land Rover after the sale to Tata. Joyce set up JLR's engineering system to mimic that of BMW, which separates its functions based on areas of competency. He knew that, to be competitive with German luxury brands, JLR would have to create its own vehicles, not adapt platforms or use major parts created for other brands.

In the first 10 years under Tata, JLR's success was due in part to a cadre of first-rate Ford- and BMW-trained managerial talent who instituted the best parts of both companies' product development processes. That was combined with fast decision-making, design that resonated with customers and a hands-off owner with a lot of faith in JLR's leadership.

It remains to be seen if all this can last another decade. For one thing, there will be turnover at the top. JLR's manufacturing chief, Wolfgang Stadler, another former BMW man, announced his retirement this month. Callum, 63, who has led Jaguar design since 1999, has hinted that he won't be around forever.

Uncertainty caused by the 2016 U.K. vote to leave the European Union and collapsing sales of diesel vehicles in Europe led to JLR's first work-force reduction, in April, when 1,000 contract workers were notified they would be released this summer.

On the product front, the hugely profitable Range Rover now has to contend with ultraluxurious SUVs from Bentley and now Rolls-Royce.

Speth, speaking to Automotive News in March on the sidelines of the New York auto show, said the company is committed to growing annual sales to 1 million vehicles, but there is no deadline. Making money, Speth said, is more important than chasing volume.

"We have to make sure we are very profitable. It is not the [volume] number at the end of the day; it is more the way forward to sustain growth," said Speth.

The upcoming Land Rover Defender will be a key vehicle in the next phase of JLR's growth plan. The rugged off-roader will come in many versions, be sold globally and, like the iconic original, likely have an aluminum body. That makes it expensive to produce. JLR has to find a way to sell it profitably in all markets.

The Defender alone won't get JLR to 1 million vehicles, nor will additional versions of existing vehicles or boutique specialty cars from JLR's Special Vehicle Operations. It is unlikely the company will add another, lower cost brand — pulling the Rover badge out of mothballs, for example — for a series of premium cars, such as what BMW has with Mini.

"The fact is, JLR is still subscale," says Warburton, the analyst. "It's too big to be niche, but 700,000 units is not really sufficient to support multiple platforms and powertrains," he added. JLR's warranty costs are still too high, and Jaguar isn't yet pulling its weight.

"This is not a business without flaws and risks," Warburton said. "But it's fantastic what's been achieved so far, and the engineering, brands, pricing and fundamental capability of the place are all light-years ahead of where they were when Tata bought it."

Last year, Tata Motors denied it was considering a public offering for JLR. And it is not known publicly whether any joint ventures, acquisitions or mergers are under consideration.

"If JLR remains an independent business, which I hope they do under Tata ownership, they have the strength to now get some good, strategic partnerships," Joyce said. "They are now a very credible car manufacturer, and they will get to 1 million units a year in some foreseeable future. That is a good enough size to be strong around the world and to fight the challenges of markets and products changing, from diesel to petrol to electric. When you have that scale, you can be quite a successful business."

Speth remains focused on steady growth and keeping JLR moving quicker than the competition. "We have to find our own way, go our own way," he said. "That's our strength that we deliver. If you compare the product substance of our cars to our competitors, we deliver vehicles we want to drive. We just have to run a little faster."