Ford's prestige UK car company Jaguar on Friday said it would end car assembly at its famous Browns Lane factory in Coventry, which builds the luxury XJ sedan and XK sports coupe models.

The plant, currently employing 2,000, will close in September 2005 but 425 jobs will be transferred to Castle Bromwich in Birmingham, which now builds the S-type sedan line and XJ and XK body shells.

Another 310 jobs in the wood veneer interior trim operation, which also supplies nearby Aston Martin at Gaydon in Warwickshire, will remain at Browns Lane.

While the axe falls at Jaguar, 300 new jobs are being created at Aston Martin. Ford Europe and Premier Automotive Group executive vice-president Mark Fields told a news conference former Jaguar workers would be considered "favourably" for those posts.

Questioned by reporters, Fields said moving Jaguar production to the United States "is not in our plan right now".

He said the moves announced on Friday won't immediately fix Jaguar but Ford expects a sequential improvement which it will closely monitor.

"If we don't see an improvement, we will take action," he added.

Production of aluminium Jaguars (the XJ saloon range and the new X150 sports car, which replaces the XK) will be consolidated at the Castle Bromwich plant. Jaguar said this will result in a fully integrated, efficient and technically advanced aluminium vehicle production facility with panel stamping, body assembly and final assembly on the same site.

Jaguar and Land Rover and chairman and CEO Joe Greenwell said that 400 Browns Lane staff will be offered "our best ever terms" for voluntary separation while 500 'white collar' and 250 agency positions will also go across the entire Jaguar UK operation. Greenwell insisted that no redundancies will be compulsory but unions, vowing to fight the job cuts, said that is unrealistic.

Jaguar, part of Ford's Premier Automotive Group, said it will launch an all-aluminium XK sports car line early in 2006 and add premium diesel models to its XJ and X-type lines in Europe. It has just launched the long wheelbase XJ in the US and will add the X-type station wagon there in November.

Jaguar also said it will review its retail and market infrastructure throughout the world, and reduce discounted sales to daily rental companies.

The brand will also withdraw from Formula One racing at the end of 2004.

Jaguar said its headquarters will remain at Browns Lane, along with the Jaguar Daimler Heritage Trust and the wood veneer manufacturing centre. These take up a small part of the Browns Lane site and the rest will be sold for re-development.

Greenwell said: "Our new business plan was developed following a rigorous review by the Jaguar management team. We examined a number of alternatives and I would not be presenting this plan today had I not been absolutely convinced that it is the right plan and completely necessary.

"The fact is despite significant sales growth and excellent levels of quality in recent years, we have not been able to keep pace with significantly larger competitors. We have too much capacity and this is our underlying structural problem. Our bottom line has further deteriorated this year with the weakness of the dollar, unprecedented incentives in the premium market and the shift from premium cars to SUVs. We had no choice but to take action and I firmly believe that all the elements of this plan are essential if we are to stem the losses.

Fields said: "Decisive action was needed to get Jaguar back on track and to ensure a viable future. Despite the actions taken by the company's management over the past few years and despite the fact Jaguar is again the highest rated European brand on product quality, Jaguar is back in a serious loss-making position. There are a number of external factors which have exacerbated the situation but we have faced and tackled the fundamental reality, that Jaguar simply cannot support three assembly plants with annual sales of 125,000 cars."