GOLDING’S TAKE: Safe in our hands, Ford says of Jaguar
Jaguar is NOT for sale, the vice president of Ford of Europe told investors quite emphatically today.
Talking to 250 auto industry investors gathered in Geneva by the stockbroker Merrill Lynch, Lewis Booth said in answer to questions that he was aware that "a particular journalist" kept saying that Ford would have to sell Jaguar but it was not true.
"None of our premium brands are for sale. The development of premium brands is part of our competitive advantage."
He disclosed a very strong corporate attachment to the Premier Auto Group from Bill Ford downwards - despite a hideous recent profit performance and with Jaguar still in loss 17 years after acquisition.
The growth of premium brands amidst declining volume brands had been highly significant, he said, and Ford was very well placed to take advantage because "there was nobody else with a portfolio like ours."
"We are convinced that our strategy is sound. Over the years there will be an increased contribution by PAG to the bottom line."
Of the four badges in the PAG division, Land Rover, Aston Martin and Volvo were profitable. Jaguar was not, he said. Given that PAG lost EUR100m last year, Jaguar must have lost all of that and then some. The weak dollar had been the worst trading obstacle for the exported UK-built cars.
Jaguar was world class in terms of its quality survey results, but the speed and consistency of the improvement was not as fast as he would like. Richard Parry-Jones who runs engineering development, is taking responsibility for picking up issues earlier. The next series of cars would also be far more modern. The consumer had not liked the highly capable but retro-look XJ saloon.
Asked his reaction to rival companies forecasting that their strategies will generate operating margins of 6% plus (PSA, Renault and DaimlerChrysler all produced visions of highly profitable financial year 2009 during the recent results season), Booth was sceptical.
"I look forward to all of us reaching our margin targets. But seeing is believing."
Bundled with that answer was disparagement of suggestions that volume makers could just switch on a premium car at will. The comment must have been aimed at Carlos Ghosn, the CEO of Renault who said precisely that during his presentation of the future for the French company earlier this month. He would generate a luxury division to assist with the expansion of margins, Ghosn had said.
Booth is certain that the only way to make Ford of Europe profitable is to get the product right and then to get the costs of manufacture down.
He was quick to say that Jaguar was not moving to a low-cost manufacturing territory. But he was equally clear that Ford of Europe would. His Turkish facility, Otosan assembly, Kocaeli, - though only for Transit vans at the moment - was making 250,000 units. The suggestion was that Turkey was ripe for car assembly.
The next small car generation will be in combination with Fiat who manufacture in Poland.
Component manufacture is moving East fast. The indication of that speed was a confident forecast from Booth that "Ford of Europe will improve profits during the product cycle this year next year and in 2008."
He said that he was beginning to work out which component makers he was going to work with and that the chosen partners would have to follow their footprint in the move to cheaper countries. One of the priorities was to ensure that no quality was lost. The other was to ensure that where possible, the chosen supplier got scale by supplying across Ford of Europe and PAG. Starter motors for example - a component of no real consequence to the buyer of a premium car as long as it worked - could be common across all cars.
Referring to a comparison that VW had made to illustrate VW's cost of labour per car, Booth agreed that Ford was efficient in labour productivity and that was one of Ford's competitive advantages.
With new product delivery peaking throughout the group (11 new models including Mazda at Geneva) this should be a good year financially for the group.
Investors were surprised at the bullish display which was in some contrast to the tone set in the presentation of 2005 results by the parent group last month. Booth has a little way to go yet to prove that he can deliver on a Jaguar turnaround.