News of another cash injection for Ford’s ailing luxury sedan brand Jaguar suggests that the widening losses at the business continue to undermine Ford’s recovery plan. However Ford is right to shore up the firm financially while its restructuring takes effect, though it should also hope that American consumers regain their penchant for sedans over SUVs.
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The British sports car and saloon manufacturer has been somewhat in the wars of late, and the latest injection of funds from its US owner follows a £260 million handout from Ford last year. The seriousness of Jaguar’s position has become apparent after the firm revealed that it racked up losses of £601.1 million in 2003 – a sizeable increase over the previous year.
On the face of it, the latest news suggests that the situation at Jaguar is going from bad to worse despite last year’s cash bail-out and the controversial plans unveiled in autumn 2004 to rationalise Jaguar’s production and back office operations. The company was on the receiving end of considerable criticism after it announced that car manufacturing is to end at the historic Browns Lane plant in Coventry, UK – a factory seen by many as the spiritual home of Jaguar.
Jaguar staff and Ford management alike need to appreciate that the business will not be revived overnight. Ford’s move to reinforce Jaguar’s financial position is a sensible one given that, by their very nature, the benefits of last year’s restructuring measures will not manifest themselves for several months yet.
The US auto giant surely knows it has a tremendous asset in the luxury car segment, given Jaguar’s reputation for high quality vehicles and its tremendous brand equity. Yet there is little more Ford can do while the luxury end of the market is as tough as it is at present, especially in the US. Buyers at the top end of the that market are increasingly looking to buy luxury SUVs rather than sedans, meaning Jaguar is competing against a raft of other European marques – as well as Toyota’s Lexus arm – for a shrinking share of the market at present.
While there is no cause yet for undue pessimism, Ford must appreciate that the revitalisation of Jaguar will be a slow and sometimes difficult process.
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