Marketplace Report: Ford Shores Up Jaguar Unit
ALEX CHADWICK, host:
Back now with DAY TO DAY. I'm Alex Chadwick.
The British luxury carmaker Jaguar has just received a Christmas present from its American parent, the Ford Motor Company. Ford has handed over more than $2 billion to rev up the finances of its British subsidiary. Joining us from the "Marketplace" desk in London is Stephen Beard.
Stephen, what's gone wrong with Jaguar? Why do they need the money?
STEPHEN BEARD ("Marketplace"): The cat is clearly running out of lives, Alex. It's--the money is required for more than revving up the company. In fact, Ford must really rue the day in 1989 when it bought Jaguar for almost $3 billion in today's money. It's struggled to make a profit out of it ever since.
The brand is great. I mean, the sleek sort of pantherine image is very appealing. But as far as the company is concerned as a money-making machine, it's a clunker. And as commentators here are fond of saying, `The cat is a dog.' Jaguar is a pig in a poke.
CHADWICK: Well, we could go on in that vein, but I have to ask you, these are, you know, immensely desirable cars when I see them on the street. What is wrong? Why is Jaguar losing money?
BEARD: The productivity of the British factories making the car has always been lower than the best American plants. It's proved a difficult car to sell in big enough volumes to make money. Jaguar simply hasn't pulled off BMW's trick, for example, of being able to produce some high-volume, lower-cost vehicles while maintaining the reputation and the allure of the more expensive cars. It hasn't been able to go downmarket while maintaining the luxury image.
CHADWICK: So how much trouble is Jaguar in? Maybe terminal trouble?
BEARD: Well, it's pretty big trouble, no about it. It lost a billion dollars in 2003, three-quarters of a billion last year. And this year, well, it's been reported that there's really little chance of the company breaking even until the year after next. And adding to its problems, like a lot of old manufacturing companies, Jaguar has a pension fund shortfall of more than $600 million.
CHADWICK: Well, so even if Ford might want to cut its losses and dump the company, who's going to want to buy that?
BEARD: Well, indeed. I mean, there is a problem. Ford says, of course, it won't dump the company, and this $2 billion cash injection underlines that point. But Ford itself, of course, is under a lot of pressure. It's struggling in a very tough US market. It reported a third-quarter loss of 218 million in October and next month is expected to announce some big job cuts and plant closures in North America. So Jaguar employees must be feeling a little nervous this Christmas. These are tough times for carmakers generally and tough times perhaps for the US construction industry.
Coming up later today on "Marketplace," we'll be looking at the big drop in new home sales.
CHADWICK: Thanks, Stephen. Stephen Beard of "Marketplace" from American Public Media.