Richard Feast: Jaguar needs a jump start

All the hand-wringing and heartache over Jaguar misses one important aspect. Most of its troubles stem from flawed decisions by past managements at Jaguar and at its parent company, Ford. The sterling/dollar exchange rate which makes it more difficult to export to the United States - Jaguar's largest national market - only hastened the inevitable.

Jaguar's problem is that car buyers are underwhelmed by the products planned and developed by those managements. The cars are not performing in the only place that matters: the market. The company acknowledges it has little prospect of selling more than 130,000 cars a year with its current line-up. Yet only two years ago it talked of selling 200,000 a year by the middle of this decade.

The grand strategy to mount a serious challenge to Audi, BMW, Mercedes-Benz and (in the US) Lexus has failed. Now Ford has to find a new role for Jaguar. It is a daunting challenge, because Jaguar's rivals are prosperous, far bigger and continue to sell at or near record levels. This is Notts County versus Arsenal territory.

How did it go wrong so quickly? Ford began its ownership of Jaguar in fighting mood but seems to have lost heart. It paid nearly six times asset value for the company in 1989 and then invested heavily in order to improve quality and efficiency and to launch new models. Sales rose steadily through the 1990s and into the new millennium. Poor quality is not an issue today. The company had notched up four successive record sales years when it unveiled the new generation XJ saloon at the Paris motor show two years ago. With hindsight, the event can be seen as the turning point. Jaguar's ambitious plans began to unravel shortly afterwards, primarily because of several key misjudgments over the previous few years.

One concerned the unrealistic development schedule for the XJ. Other cars have spaceframe aluminium chassis but Jaguar's aluminium monocoque was a first and so proved troublesome to perfect. Jaguar wisely decided not to put the XJ on sale until production problems were solved. That was in April 2003. But production of the previous XJ had ended in the middle of the previous year. With no income from its most profitable model for over half a year, the company's cash flow was hammered. Technically, the XJ is now a success. Commercially, it has failed to meet expectations.

The most likely reason is Jaguar's product-design policy. Combining high-tech construction with olde-worlde looks sent mixed messages to potential XJ customers. The company had a bad dose of design constipation across the whole range, though. Its calendar was firmly pasted down in the Swinging Sixties. Meanwhile, its competitors began taking more modern design cues from Philippe Starck and Lord Foster.

Jaguar promises a new design direction with the X150 coupé which will replace the XK in the first half of 2006. Perhaps it will jump-start sales, but the company's prospects seem destined to get worse before they get better. The new Audis, BMWs and Mercedes on the road will change public perceptions about what premium cars should look like. By the time the XJ, S-type and X-type are replaced in the second half of this decade, the range will look even more dated. Then there is excess capacity, which is behind the decision to close the Browns Lane factory.

Ford investments allowed Jaguar to broaden its range with the S-type (1998) and X-type (2001). The penalty was higher fixed costs because the launches involved additional factories at Castle Bromwich and Halewood. Even at the planned 200,000 sales a year - let alone 130,000 - three factories represent at least one too many. Volvo, Jaguar's sister company, can make more than 500,000 in two factories. Jaguar's sales slump only hastened the decision to eliminate one of the trio. The drop in demand also occurred because Jaguar seemed not to notice how much customer demand was changing. Buyers want greater variety than Jaguar can offer.

Jaguar finally has the diesels that its German rivals have had for years. But Jaguar still cannot offer customers all the coupés, roadsters, hatchbacks, convertibles, estate cars, crossovers and people-carriers that the German firms do.The argument that Jaguar's small scale could not warrant the cost of developing diesels and alternative body styles raises questions about the purchase in the first place. Did Ford really expect Jaguar to match Mercedes on the cheap?

Jaguar's product-planning failures have echoes in its feeble Formula One effort. It is believed to have consumed about £70 million a year, or enough over the four years of its existence to have put the abandoned F-type roadster project into the showrooms.

While the F1 racing effort was a perverse way to remind millions of TV viewers every couple of weeks that Jaguars are not very good, its budget was probably half as much as those of BMW or Mercedes. In racing, as in road cars, if Ford expects Jaguar to rival, say, BMW, it needs to allocate a BMW-level development budget. Without that, Ford will have to find a new direction for Jaguar. It is hard to see what that would be.