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Last Updated: Friday, 17 September, 2004, 10:35 GMT 11:35 UK
The suffering of Ford's luxury car division
By Jorn Madslien
BBC News Online business reporter

Ford's European luxury brands subsidiary is in serious trouble.

Land Rover Discover 3
The PAG models' slick exterior belies the chaos on the factory floor
The Premier Automotive Group - which includes the Jaguar, Land Rover, Aston Martin and Volvo brands - is facing mounting difficulties, just months after it announced an impressive return to profit.

Early this year, PAG reported $164m pretax profits for 2003, having recovered from a $740m loss in 2002. This year, the markets turned ugly once again and PAG slipped back into the red.

The group racked up a second-quarter loss of about $362m, down from $162m profits a year earlier, and nobody expects it to make a profit for the year as a whole.

Sales of key models continue to slide and uncertainty reigns in its factories in the UK where most of its models are being made.

Jaguar

It was the abysmal performance by Jaguar that initially sparked a rethink by Ford. The luxury marque has failed to meet lofty sales expectations and pulled the rest of the group down with it.

Jaguar X-type at the Halewood factory on Merseyside
Jaguar's losses acted as a red rag to a bull

Sales to US customers fell 24% in July this year from a year earlier. Last month, Jaguar sales fell 38%.

One reason: the weak dollar is making UK-made Jaguars particularly pricey.

But there is more to it. Jaguar's entry level X-type is behind much of the car maker's problems, both in the US and elsewhere.

The car has suffered from image problems and failed to make it big in its target market of young US executives.

The X-type has now evolved into a popular set of wheels for the retired, some evil tongues suggest.

The X-type shares a platform with the Ford Mondeo and can be delivered as an estate with a diesel engine; hardly a brand booster, critics say. Indeed, sales of both the S-type and the XJ are sliding in the US.

Given that the US market accounts for almost half of Jaguar's sales, the slump in America meant the Big Cat accounted for more than half of PAG's latest losses.

So as the summer was coming to an end, PAG announced it would cut Jaguar's output by 11% and reduce the hours worked by its 8,000 staff.

Jaguar has now decided to end car production at its historic Browns Lane factory in Coventry - the place where large-scale production of Jaguar motor cars started in the 1950s.

Land Rover

The future of the formerly BMW-owned car maker Land Rover - whose models range from the rugged Defender to the swish Range Rover - has also been in the balance.

It all started on 27 May this year when PAG chief Mark Fields warned workers and managers that they could face the sack unless they found ways to improve productivity and efficiency.

Little boy standing in front of an Old Land Rover
Land Rover is being forced to grow up fast

The crisis clouded the launch of Land Rover's latest model, the Discovery 3, which was unveiled at the Birmingham Motor Show around the same time.

With industrial relations strained to breaking point, an eight week deadline was set, then stretched as early solutions presented to Mr Fields were rejected.

Land Rover's managing director Matthew Taylor and the unions were sent back to the drawing board to try again until at last, on 15 September, PAG approved a turnaround strategy that would safeguard the Solihull factory.

The 8,000 Land Rover workers are due to vote on 20 September on whether to accept new working conditions.

But Land Rover's problems are not limited to tension at the factory. Its image has been hammered by weak performance in influential quality surveys and by a recent decision by the British Army to ditch the Defender as its vehicle of choice.

Last month, Land Rover sales in the US fell 33%.

Volvo

PAG's other 4x4 is doing better. The Volvo XC90 flagship Sports Utility Vehicle, or SUV, has made massive inroads in the US.

Volvo XC90
Volvo's flagship is a road car that also feels at home on the farm

The XC90 is widely seen as the "class leader" - meaning it is better than competing SUVs, and waiting lists are long despite a desperate push in Sweden to boost output. A dream to drive both on-road and off, the XC90 has won a string of awards, including North American Truck of the Year and Motor Trend's SUV of the Year.

So never mind Volvo's recent recall of 460,000 S60 and S80 saloons and XC70 and V70 estates, mainly due to a failing radiator fan that resulted in fires in some vehicles. The recall probably did little to dent Volvo's image.

In the US, where one-third of all Volvos are sold, the XC90 will soon be kitted out with a powerful V8 engine that will help it take on luxury marques such as BMW, Mercedes and Lexus.

Aston Martin

PAG's James Bond-mobiles are also making their mark.

Aston Martin DB9 Volante
Aston Martin wants to raise production from 2,000 to 3,000 cars a year

Its latest model is the four-seat DB9 which was first seen at the Frankfurt Motor Show last autumn and which is competing in the lucrative market dominated by rich 40-somethings.

The car is joined by the two-seat Vantage and the supercharged Vanquish in the Aston Martin line-up.

A low-volume marque, Aston Martin is looking to raise volumes from 2,000 to 3,000 per year. The cars are sold in dedicated showrooms, and the unit's dealership network is set to expand from 105 to 140 showrooms by the end of next year, Automotive News reports.

The hope is that this should help lift sales in the US to 35% of Aston Martin's total sales from the current 30%.


SEE ALSO:
Workers brace for Jaguar closure
15 Sep 04  |  Business
Land Rover road map vote looms
15 Sep 04  |  Business
Ford mulls Land Rover plant's fate
02 Sep 04  |  Business
8,000 Land Rover jobs threatened
27 May 04  |  Business


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