According to The Detroit News, which obtained details of an internal analysis outlined to executives, the British luxury marque is expected to lose more than $550m this year, more than $300m next year and is not expecting a profit for several years.
The paper said the brand finally seems to have a realistic turnaround strategy as it turns away from mass market models to concentrate on building elegant sport coupes and sedans for the motoring elite. Analysts reportedly applaud the strategy, but anyone familiar with new ex-Boeing Ford CEO Alan Mulally’s disdain for money losers has to question Jaguar’s future, the report noted.
Jaguar may not officially be for sale, but Mulally has made it clear he is taking a hard look at the marque, the Detroit News said.
The paper said Ford bought Jaguar in 1989 for $2.5 billion – far more than conventional wisdom held the brand was worth and it was widely viewed as a vanity purchase. Since then, Ford has invested about $10bn in the brand, including a $1.2bn bail-out in 2005.
“Clearly, a huge amount of money has been spent on Jaguar by Ford; much of that will never be recouped,” Garel Rhys, director of the Centre for Automotive Industry at Cardiff University in Wales, told the Detroit News, adding: “Jaguar has something like 18 months to demonstrate that the money is doing something.”
Rhys reportedly also believes Jaguar is heading in the right direction as specialty nameplates like Jaguar account for 12% of the world automotive market. The economic import of such brands is even more impressive because of the prices – and profits – they command.
“Jaguar gives Ford a portion of that global executive market, which is something General Motors doesn’t really have,” Rhys told the Detroit News. “The rewards of getting it right are phenomenal.”
But analyst Bradley Rubin of BNP Paribas had a different view.
“They’ve never been profitable. They’ve just been bleeding money. If I were Ford, I’d cash in my chips,” Rubin told the Detroit News, adding that Wall Street would welcome a sale.
“It’s a huge distraction. Ford needs to focus on its own problem, which is North America,” he told the paper.