Master of the big cats

JAGUAR chairman Nick Scheele, local hero?

The unflappable car industry executive grins, too much of an old pro to take the flattery seriously - even if last week Ford Motor Company, Jaguar's owner, announced it would assemble the newest Jag, the X400, at the Halewood plant on Merseyside and not, as originally tipped, in Cologne, Germany or the US.

Having worked for Ford since graduating from Durham university in 1966, the 54-year-old Essex boy is too practised, if not too sceptical, to take the sentimental John Bullishness gushing forth in the wake of the Halewood announcement with anything but a large dose of salt.

Ford's decision to invest pounds 400m, secure 3,000 of the 4,500 jobs at Halewood and produce up to 100,000 of the pounds 20,000 "baby" Jags a year there beginning in 2001 is the result of fierce bargaining between Detroit, the Jaguar head office in Coventry, the Department of Trade and Industry, Brussels, and the unions. It is also about the complex international politics of car making which Scheele knows so well.

For four years before taking over at Jaguar in 1992, he ran Ford Mexico. Much of his time was spent dealing with Confederation Trabajadores Mexican (CTM), the car union then run by the octogenarian Fidel Velazquez, known throughout the land simply as Don Fidel.

Under Scheele, Ford developed a new assembly plant on the Mexican-US border along Japanese lines. "We were recruiting 19- and 20-year-olds," he recalls. "Putting them in dorms. Putting them on training courses. They had to qualify before they could begin work."

The CTM went along with that but - resisting modernisation on its core turf - it struck at Ford's Mexico City plant. Scheele met Don Fidel in a back room and wangled a settlement. But a breakaway faction balked, and a plant floor shootout ensued. Suddenly, Scheele had a murder investigation on his hands, one with explosive political overtones, since the CTM was aligned with Mexico's ruling Institutional Revolutionary Party, while the breakaway faction had lined up with the reformist Revolutionary Democratic Party.

Nothing so dramatic happened during negotiations over Halewood. Nonetheless, labour relations were key to the deal. The 35-year-old Halewood plant has a history of industrial discord. A year ago Ford - which was then and probably still is now unprofitable in Europe - announced its intention to close Halewood and move production of Escorts to Spain. A union leader remembers telling then Ford Europe chief Jacques Nasser: "You are not going to do this! You can cut capacity in Europe if you want, but not at Halewood. If you go ahead, your production will be stopped!"

Out of this emerged an interim plan - a guarantee by Ford that, with a pounds 15m government subsidy, it would produce multi-activity vehicles at Halewood and so save some of the jobs due to be lost after Escort production was moved in 1999. Eventually, behind the scenes, the confrontation produced something better - the plan announced last week.

Debating Halewood's future, Ford and the Transport & General Workers Union began talking to Jaguar and the union branches not only on Merseyside but also in Coventry, where Jags are made. This group started talking to the DTI. The result: the plan to turn Halewood over to Jaguar. Scheele emerges not as a local hero, but as a symbol of the more co-operative winds blowing through UK industry.

Assuming the DTI puts up somewhere around pounds 40m - to help offset the extra cost of setting up X400 production at Halewood rather than Germany or the US - Jaguar will come out ahead. So will Merseyside. So will the country, if the deal serves as a blueprint for others like it.

Scheele still faces a gargantuan task at Jaguar. Founded in 1922 by the design-conscious, speed-loving Sir William Lyons, the company reached a peak in 1961 with the launch of its legendary E-type. Later it amalgamated with British Leyland and suffered all the tribulations such as the poor distributorships besetting all BL operations.

In 1989 Ford paid a stiff pounds 1.6bn for the privatised Jaguar, outbidding arch-rival GM. The collapse of the 1980s boom brought five years of losses. In 1995 Jaguar, just, returned to profit, but only now is Ford's investment beginning to look like a wise one in the very long term.

A fair share of the credit for the tentative turnaround goes to Scheele. "When he spots an opportunity he has the guts, the courage and creativity to take advantage of it," said Robert Hendry, president and chief executive of Saab Automobile, who worked opposite Scheele at GM in Mexico in 1991 and 1992.

Credit also goes to Ford headquarters in Dearborn, Michigan, for its stubborn pursual of its original Jaguar gameplan: to reposition it as a premium executive car maker, opening up a bigger market, as well as a luxury car maker, by developing a full range of Jaguar models.

Last year Jaguar began selling the XK8 convertible and coupe, the so- called "spiritual successor" to the E-type, and the rollout has been rated a success. Next year Jaguar rolls out the X200, the first in its bid to take business from the Big Three of the executive car market - Mercedes- Benz, BMW and Audi. Three years from now should come the X400 "baby" model to be made at Halewood.

If all goes well, Jaguar will emerge as a producer of 200,000 executive and luxury cars a year, up from 50,000 now. It will sell on the basis of engineering, style and the evocation of its illustrious past. It will be positioned to sell to younger drivers, who then stay loyal to the company throughout their lives.

But if the new models bomb, Ford will be left with a brand name for which it has no strategy. The danger in stooping from the luxury to the executive car market is that Jaguar will lose its cachet. "The issue is, by increasing the volume do you dilute the brand?" said Alan Baum, an analyst at auto research company IRN in Detroit.

Downplaying the praise heaped on him last week, Scheele offered the ritual disavowal: "I view my role not as directing but as working with a great team," he said.

Still, the words rang true. If Nick Scheele really is going to turn Jaguar around, he will need more help from Ford, the unions, and the government. Local hero? Possibly, but not yet. Saving Halewood is one thing: saving Jaguar will be another.

Copyright: IOS & Bloomberg