Commentary: The Care And Feeding Of Jaguar

Big missteps have tarnished the marque, which now clouds Ford's outlook

Jaguar (F ) is Bill Ford's recurring nightmare. For 15 years, Ford Motor Co. (F ) has owned the British luxury marque, and each time it seems to turn the corner, Jaguar Cars Ltd. starts bleeding red ink again. On Sept. 17, Ford unveiled yet another rescue plan, announcing that it will shutter an aging factory in Coventry to reduce excess capacity and cut costs.

Each setback pushes CEO Ford's ambitious goals for the company's European brands further out of reach. In early 2002, he vowed that Ford's Premier Automotive Group -- which includes Land Rover (F ), Volvo (F ), Aston Martin (F ), and Jaguar -- would contribute nearly a third of pretax profits by 2006. While Ford is sticking to that target, the problems at Jag dragged PAG down to a $342 million operating loss in the first half. If Ford can't turn Jag around, meeting Bill Ford's vow to rake in $7 billion in pretax profits by mid-decade will be tough.

So why has Ford failed to turn its top-shelf brand into a consistent moneymaker? Factory efficiency and quality are much improved at Jaguar. But there have been some epic stumbles, not least the rollout of the X-Type compact, a poorly executed entry-level luxury car known as the Baby Jag that turned off Jag loyalists. Add in an overly ambitious expansion, stale styling, and one-size-fits-all marketing, and it's easy to see why Jag had to discount heavily to hit its global sales target of 125,000 in '04.

Solving these problems will be hard, but not impossible. Here's a blueprint for giving Jaguar back its growl:

IT'S THE CARS, STUPID Job One may be a replacement for the X-Type. There's nothing wrong with rolling out starter luxury wheels; BMW and Mercedes did good jobs with their 3 Series and C-Class cars. But Ford made a huge mistake basing the X-Type on the mass market Ford Mondeo, which cheapened the brand. Borrowing a better chassis from Volvo would be a good start. To correct the first car's failings, the new model needs plenty of horsepower, silky handling, and an interior that isn't cheesy. "If they spent another 200 bucks on the interior, they could get some results," says a Ford insider.

LOOKS REALLY DO COUNT Jag needs more than engineering fixes. Its design studio has to style cars with the sinuous, feline grace that defines the brand, while making sure new offerings look fresh. Sales of the revamped XJ, Jag's flagship model, are suffering because it looked too much like the old one; buyers who shell out $70,000 want everyone to see that they have a new Jag. That could be fixed with a quick overhaul of the exterior design. Ford design chief J Mays says next year's completely redesigned XK sports car will be a "forward-looking" car that "will radically change Jaguar's image." Bring it on.

GET A MESSAGE Ford bungled Jag's marketing by adopting a mass-market approach for the luxury-niche brand -- and then changed the strategy as frequently as though it were engine oil. Jag needs consistent positioning as enduring as BMW's three-decade old "Ultimate Driving Machine." Jag also uses the same pitch worldwide -- never mind that its distinct "Britishness" plays differently in Peoria than it does in Piccadilly. Worse, the current slogan, "Born To Perform," extols horsepower not looks, even though style is the main reason owners cite for buying a Jag. Ford ought to dash the current strategy and hire a small, talented agency that will nurture the brand's leaping cat icon, helping it segue in the U.S. from Avengers-style panache to the generation personified by Brit actor Jude Law.

RUBBISH THE REBATES Better products and an appealing marketing strategy should help Jaguar cut back on the cheap sales gimmicks that have tarnished its image. Jaguar CEO Joe Greenwell says he'll reduce heavy rental car sales and hard-sell deals. It's time: U.S. incentives neared $5,000 per car in August, vs. $464 at Lexus and $552 at Mercedes, according to auto data Web site And the only luxury brand with lower resale values is Jag's PAG stablemate, Land Rover.

Ultimately, Ford needs to get real. Even Mark Fields, head of PAG and Ford of Europe, says that "a quick turnaround is unlikely." If demand still doesn't match Jag's reduced output by next year, more painful factory cuts may be needed. Jaguar is a venerable brand that survived decades of antique factories and quality so bad it was the butt of jokes. It would be a shame if the British cat ended up as road kill.

By Kathleen Kerwin with David Kiley in New York.

— With assistance by David Kiley

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