Detroit Stalking Jaguar, One of Last of Its Breed : Automobiles: Ford and General Motors are vying for a piece of Britain’s venerable Jaguar PLC, and the British seem resigned to relinquishing the keys to their car industry.
When Ford Motor Co. announced last month that it planned to buy a 15% share in Britain’s Jaguar PLC, it sought meetings with government ministers, opposition political leaders and even trade union officials to explain its decision.
It may seem like a lot of unnecessary public relations effort given the value of the deal, only about $300 million at best--spare change for a giant like Ford. But “they remember what happened last time,” noted Gavin Launder, auto industry analyst for the British investment bank Kleinwort Benson Ltd., “and they’re not going to let it happen again.”
“Last time” was 1986, when Ford entered into what were supposed to be secret negotiations with the government to buy Austin Rover, the then-state-owned descendant of the companies that once produced such famous, now-defunct British makes as Morris, Triumph and MG. General Motors was simultaneously trying to cut a deal for Leyland Trucks and Land Rover, two other units of Rover Group.
But when word of the talks leaked, there was such a public outcry that it killed both sets of negotiations. It was as if the government was trying to sell the family silver, outraged critics charged.
Now, three years later, what of Jaguar--the prestigious successor to the manufacturer of Britain’s very first motor car and still the builder of automobiles for no one less than the Queen and Prime Minister Margaret Thatcher? Isn’t there a similar patriotic uproar now that not only Ford, but also General Motors are publicly on the prowl for at least a substantial piece of the company?
In a word, no.
There are a few grumbles from classic car buffs and Jaguar--that’s a three-syllable word here: JAG-you-ah--owners’ clubs. But even the opposition Labor Party, which usually delights in any issue with which it might discredit Thatcher’s Conservatives, has been surprisingly muted.
As much as Ford’s public relations people might like to think otherwise, what has made the difference is not their campaign, but the realities of Britain’s once-proud auto industry.
New car sales here are at record levels, but well over half of the cars being sold are imports. While domestic production is on the increase, it is still a third below the peak achieved in 1972. And even the cars that are produced in British plants these days bear mostly non-British nameplates.
In fact, given Ford’s stake in Jaguar--and the Rover Group’s announcement in July that Japan’s Honda was taking a 20% share in that firm--Rolls-Royce has become the largest wholly British-owned auto maker. Its output, however, is fewer than 3,000 cars a year, or about 0.2% of the total produced in the country.
“There is a motor industry in Britain rather than a British motor industry,” said Garel Rhys, a Cardiff Business School professor and adviser to the House of Commons’ Committee on Trade and Industry.
“The motor industry is still a very, very important part of the economy,” Rhys added in an interview. “But we have to accept that we can’t turn the clock back, and we’re just not going to own very much of it.”
Rover, which became a subsidiary of British Aerospace last year, remains this country’s largest-volume auto maker, but only by a whisker over Ford of Britain. General Motors/Vauxhall is third, followed by the French-owned Peugeot Talbot and Japan’s Nissan.
Toyota has announced plans for a United Kingdom assembly plant, and both Nissan and Honda are expanding so aggressively that by the turn of the century Japanese manufacturers are expected to build at least one of every three new cars turned out here.
It is particularly telling that the changes sweeping the industry should catch up with Jaguar, which was hailed not long ago as a shining example of this country’s Thatcherite economic miracle.
The company’s roots go back to the Swallow Sidecar Co., formed by motorcycle enthusiast William Lyons in 1922. It started building motor car bodies four years later, and in September, 1935, introduced the SS Jaguar. After World War II, the company changed its name to Jaguar Cars Ltd. and went on to perhaps its greatest fame, aided by the race track success of the legendary driver Sterling Moss.
Company founder Lyons personally introduced the car to the United States, now its biggest market, and brought back with him $1 million in orders, including one from the late actor Clark Gable.
Jaguar’s E-Type model is still regarded by aficionados as one of the best sports cars ever produced. In 1960, Jaguar bought Daimler Co., which produced Britain’s first motor car in 1897. A Daimler remains the official car of both Queen Elizabeth II and the Queen Mother.
By the mid-1960s, Jaguar’s fortunes began to turn, and it was merged with BMC, producers of Austin and Morris cars, in 1966. That firm was merged two years later into the new British Leyland, which by 1975 had become symbolic of everything that was wrong with British industry--chronic labor problems, low productivity, inadequate investment and poor quality. The Labor government of the time had to nationalize British Leyland to save it.
A new Jaguar management team installed in 1980 found “a company that had suffered from more than a decade of neglect,” recalled David Boule, the firm’s director of public affairs.
Speaking in a British Broadcasting Corp. radio interview, Boule explained: “We had a situation where Jaguar was building 14,000 cars a year, struggling to sell them. Quality had reached a very low ebb indeed. Productivity was poor, and there seemed very little prospect at that time of the company returning to good fortunes again.”
In the spirit of the nascent Thatcher revolution, the new team boosted quality, built up its worldwide dealer network and improved productivity. And by 1984, Jaguar was ready to be an early example of the Conservative government’s program to privatize formerly state-owned enterprises. It was spun off from British Leyland (now the Rover Group) at a $400-million windfall for the government and quickly became a jewel in its privatization crown.
Jaguar’s profits peaked at the equivalent of about $150 million a year later, but with the subsequent 1987 stock market crash and the weakening of the dollar against the British pound, they soon tumbled again. In the first half of this year, the company posted its first six-month loss since privatization.
That history only proves the inevitable weakness that goes with being a small, independent company in a worldwide industry increasingly dominated by giants, according to industry experts. If it were producing 500,000 cars a year like West Germany’s BMW, Jaguar might better withstand the vicissitudes of fluctuating currency markets and interest rates, they say. But with a volume of only about one-tenth that number, it is much more vulnerable.
If Jaguar needs a backer with a broader industrial and financial base, said Kleinwort Benson’s Launder, “both Ford and GM need (Jaguar) for their strategic development.”
Both firms lack a strong entry in the European luxury car market, an area in which Jaguar offers built-in name recognition and mystique. Also, whatever either American firm would spend to gain a foothold in Jaguar, it would probably be much less than the cost of developing a new entry from scratch.
Neither Ford nor GM could take over Jaguar before the end of next year. The government retains a so-called golden share as part of the 1984 privatization package, limiting any shareholder to no more than 15% of Jaguar’s stock until the end of 1990.
Ford insists that its long-range plans are uncertain, although there is little doubt here that it wants ultimately to take control of the British manufacturer.
While Jaguar officials refused to be interviewed because of the situation, Chairman Sir John Egan has previously emphasized his determination that Jaguar “remain an independent company”--albeit one open to various forms of “collaboration with other companies.”
He has also made it clear that the Ford announcement was both unexpected and unwelcome. On Monday, Jaguar and GM confirmed that they are discussing “certain manufacturing, marketing, and other commercial joint venture arrangements,” that could involve GM “taking a minority interest” in the British firm.
The British press has even speculated that GM might begin Jaguar production in the United States.
That seems unlikely any time soon, however. To make Jaguars somewhere other than in Britain could undermine the mystique that is such a large part of the firm’s value. On the other hand, industry analysts here say that if Jaguar is to become the foot in the European luxury door for either Ford or GM, its capacity will have to be boosted considerably.
Ford has been particularly careful to depict its interest in Jaguar as part of what a spokesman called its “very long history of commitment to the United Kingdom.”
Henry Neuberger, an assistant to Bryan Gould, the Labor Party’s trade and industry shadow minister, said in an interview that Ford has been viewed “quite favorably” in Britain as a company that “operates in a fairly helpful sort of way in the U.K. economy. . . . GM has always been regarded with more suspicion than Ford.”
As the competitive international courtship continues, however, there is no question but that the level of nationalist angst visible here is minimal compared to just a few years ago, said Shauin Campbell, deputy editor of Auto Car & Motor magazine.
“I think we’re all more grown up,” Campbell said. The reality, he added, is that “there’s nothing left of the British car industry. It’s gone.” Ultimately, Jaguar, too, “will have to be taken over if it is to survive.”
As for national pride, the editor said, “it’s better that the (British) names still exist, even though they’re owned by a foreign company, than that they disappear altogether. To talk about the motor industry in nationalistic terms just doesn’t make any sense any more.”
