Ford Should Think Twice Before Jettisoning Jaguar

Keep the cat.

That’s a bit of unsolicited advice to Ford, which recently hired a consultant to help develop an overall business strategy that could involve putting its Jaguar luxury car operation on the block.

Ford hasn’t come close to earning back the $2.5 billion it doled out for U.K.-based Jaguar in 1989, but that doesn’t mean the brand can’t be a lucrative profit center if the auto maker can get the management right.

There have been a number of blunders in the 17 years since Ford closed the deal for Jag, starting with its goal to more than double annual sales to 200,000 cars. Not only was the target unrealistic – Jaguar sold 89,804 vehicles worldwide last year, it put emphasis on the wrong thing: growing volume, rather than developing the brand.

That cart-before-the-horse mentality ultimately led to one of its biggest mistakes: the X-Type. The entry-level model, too close a copy of the Ford Mondeo/Contour on which it was based, never resonated with buyers. Jag is on pace to sell only about 5,000 X-Types in the U.S. this year.

Other missteps for the brand known best for its elegant styling, include the blandly sculpted S-Type and more recent too-conservative redo of its XJ sedan.

A cutting-edge, but costly, program to use a high degree of aluminum for the XJ to trim weight and enhance performance was admirable. But the leading edge probably isn’t the place for an auto maker struggling with the bottom line.

In addition, the brand was late to the diesel trend in Europe and has failed to jump on the cross/utility vehicle bandwagon in the U.S. Why is there still no Jaguar version of the Volvo XC90, now in its fourth year on the market?

All that said, Jaguar remains worth keeping.

Luxury vehicle sales in the U.S. are growing and now account for 11.4% of the market, up from 8.9% a decade ago, Ward’s data shows. Worldwide, forecaster Global Insight projects luxury vehicle sales will total more than 10 million units annually by 2011.

Take away the Premier Automotive Group brands of Jaguar, Land Rover (also rumored for sale), Volvo and Aston Martin, and Ford no longer plays in this expanding world market.

Lincoln Mercury, already struggling at home and without a global presence, certainly isn’t the answer.

If Ford wants to kill brands, it might want to start with those. But it also might want to consider the growing fragmentation of the marketplace.

Yes, successful competitors such as Toyota seem to rule the automotive world with just three brands, not six or seven. But as the market continues to splinter into smaller niches, auto makers may find they need more brands, not fewer.

The trick remains to produce a number of differentiated models cost-effectively from shared architectures. And in Jaguar’s case, put the accent on luxury, elegance and exclusivity, not high volume.

If Ford can find the right formula and stick with it, the auto maker may find this cat has some life left in it yet.

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