Jaguar's Quality Leaps Up, But New Models Needed

Struggling automaker relies on Ford Motor Company financial aid

THE cars creep down the assembly line, providing ample time for workers to joke or sip tea. Once a symbol of elegant opulence, Jaguar Cars Ltd. has become emblematic of the collapse of the British auto industry. Sales have plunged and losses have soared, forcing the company to lay off thousands of workers.

Were it not for a helping hand from across the Atlantic, "Jaguar would not have survived," says chairman Nick Scheele. But some analysts question whether its parent, the Ford Motor Company, can provide the assistance Jaguar needs without diluting the venerable marque's distinctly British heritage.

"Ford has given us whatever we've asked them for," Mr. Scheele says, including Scheele, himself. The British-born executive was running Ford's Mexican operations when he transferred to Coventry in January 1992.

For the last few years, what Jaguar has been asking for most is money. Ford bought Jaguar for $2.5 billion in 1989.

"There's no doubt Ford paid too much," says auto analyst Maryann Keller of Furman Selz, and even some ranking Ford executives agree.

In 1992, Jaguar lost $395 million, and the losses continue, albeit at a markedly slower pace. There are several reasons behind Jaguar's slump.

* The company has not completely redesigned its product lineup in more than a decade, a glaring omission in today's hotly competitive luxury market.

* Endemic defects, in the 1970s and '80s, especially with electrical systems, created an image problem.

* Its two key markets, the United States and Britain, have been in deep recession.

As a result, worldwide sales plunged to just 22,482 last year, down from 49,498 in 1988. To turn things around, "I [need] to get new product as quickly as possible," Scheele says.

Jaguar recently updated its XJ sedan, adding a new V12 engine and refining the car's look and feel. But these changes are largely cosmetic. The real test will come next year, when Jaguar unveils a new XJ sedan. The company will follow, 18 months later, with a replacement for the current line of coupes.

The most critical product is the X200, a new compact luxury sedan. Targeted to compete with the BMW 5-series models, the X200 is expected to become Jaguar's big-volume model by the end of the decade.

The automaker's capital spending plans total $1.1 billion through 1997. Most will go into these new products, but Jaguar will add a new, more modern and flexible assembly line at its Brown's Lane Assembly Plant.

Until recently, Jaguar's design and engineering center operated much the way it had when its first vehicle - the Swallow - debuted in 1935. Now Jaguar technicians tap into Ford's database, making use of sophisticated CAD/CAM design programs. Prototype designs can be run through "crash tests" and measured for aerodynamic drag before the first clay models are ever built.

Ford also has helped Jaguar lower its parts costs. Until recently, Jaguar needed to sell nearly 50,000 vehicles to break even, but that number is down to 25,000. The redesigned XJ-12 is the first Jaguar to come in both on time and under budget.

But Ford is also aware it cannot take over Jaguar's revival. "The image is what we bought and we'd be foolish to dilute it with an overt association with Ford," says Richard Beattie, vice president of sales and marketing for Jaguar Cars North America, who came from Ford.

One of Jaguar's most difficult challenges is to improve quality - both real and perceived. In recent months, the automaker has shot from the bottom into the top 10 on the oft-quoted J. D. Power quality charts. But it still has a long way to go to catch up to Japanese competitors, such as Lexus and Infiniti, which captured the top two spots on the Power survey.

To ease the concerns of skeptical luxury car buyers, the automaker recently launched its "Dream Guarantee" program. Dissatisfied American customers can return their car and get their money back within 30 days.

Scheele predicts big gains in the years to come. Once the new X200 is in production, he suggests Jaguar sales could break the 100,000 mark.

The company has won at least one convert. Ms. Keller of Furman Selz says she was surprisingly impressed after a recent tour of the automaker's operations."You have the sense it's a real car company now. What I saw proves they can make it."

That is, Keller underscores, if Ford continues to pump money into Jaguar until it is strong enough to fund its own aggressive plans.