Suppliers with big investments in the Jaguar XJ programme are nervously monitoring reports that Ford Motor Co., Jaguar’s owner, will close Jaguar’s Browns Lane plant in Coventry, England.
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Plenty is riding on the outcome for companies such as Lear Corp, which supplies carpets, headliners and seats from three sites in and around Coventry and Polynorm Stadco, which runs the press shop in Castle Bromwich for the XJ’s aluminum body.
Jaguar along with Volvo, Aston Martin and Land Rover, is part of Ford’s Premier Automotive Group (PAG), which is expected to contribute 30% of Ford Group profits. Last year PAG lost £77 million before taxes.
While this improved to a nine-month pre-tax profit of £105 million so far in 2003, Jaguar doesn’t make money and probably never has in 14 years of Ford ownership.
In 2002, the British marque ran up a loss of around £500 million on sales of £5 billion, mostly because of difficulties engineering the XJ’s aluminium body. But Jaguar’s biggest cat isn’t its biggest problem.
In 1996 Jaguar had two models — the XJ and the XK coupe — both assembled at Brown’s Lane. Then an ambitious expansion program saw two new production plants open: Castle Bromwich for the S-type in 1999 and Halewood for the X-type in 2001.
In 2002, Jaguar produced 123,000 vehicles in its three plants.
In the same year, BMW assembled over 225,000 5 and 7 Series cars at its Dingolfing, Germany, plant alone.
Those economies of scale just don’t add up.
XJ and S-type sales are holding up but the X-type, which competes with the BMW 3 series and the Mercedes C-class, has not been a success. Jaguar initially hoped for unit sales around 100,000 but in 2002, the first full year on sale, less than 70,000 cars were assembled.
In the nine months to 30 September 2003 less than 40,000 cars were made. The Halewood plant has capacity for around 125,000 units. At that level, plants need to operate above 85% of total capacity to show returns.
Jaguar has had problems fitting the X-type into its brand identity, especially in the key North American market. In Europe Jaguar didn’t do itself any favours by not offering a station wagon or diesel engine for the first two years.
Now Ford must address the imbalance. Despite recent large investments in Castle Bromwich and Halewood, neither plant has flex capability, so moving the XJ into either is going to take more money, and the car has only been in production for a year.
Some tough decisions lie ahead.
