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Jaguar Re-Engineered and Ready to Go

A new sedan, slightly smaller and a bit less expensive than the Jaguar XF, is on management’s wish list.

DETROIT – Jaguar Cars enters 2010 fully armed and with rising expectations.

With its latest entry, the all-new XJ due for launch in late March, the British car maker completes a wrenching 2-year program to turn over its entire product lineup just in time for what it expects to be the beginning of a U.S. market rebound.

Last year, Jag sold about 50,000 cars worldwide, and that volume was achieved largely with only its new XF model, launched in 2008, to carry the ball. The auto maker phased out the ill-fated X-Type model in 2009, limiting availability of the baby Jag that was spawned from a previous-generation Ford Mondeo.

Also gone was the old S-Type, and volume was limited on the XK while it was fitted with two new engines and other upgrades.

“We’ve got the new lineup together here in Detroit, so in many ways I think it’s a landmark show for us,” Jaguar Managing Director Mike O’Driscoll tells Ward’s in an interview at the North American International Auto Show. “We’ve come to an end of a real intensive 30-month period.”

The new XJ will be offered in both standard and long-wheelbase versions, and O’Driscoll expects two-thirds of buyers in the U.S. and China will opt for the stretched model. The rest of the world will favor the standard version by a 2:1 ratio, he says.

The new, sleek 4-door also gets a 3L V-6 diesel option in Europe, where it is expected to be ordered by 80% of buyers. The new oil burner, supplied to Jaguar through a Ford Motor Co.-PSA Peugeot Citroen development joint venture, also will be sold in some emerging markets outside Europe, but not the U.S., where the car will be offered with a choice of three gasoline V-8s ranging from 385 hp to 510 hp.

Additional development would be needed to make the diesel comply with U.S. emissions requirements, including fitment of a urea tank. And while Jaguar is keeping an eye on market demand here, O’Driscoll says he doesn’t believe there is much interest from Americans in diesels.

“We have no plans to bring the diesel to North America,” he says. “We would need some definitive trends in the marketplace. As hard as some of the German manufacturers are pushing (diesels)…I don’t think the American public’s listening.”

O’Driscoll is more bullish on hybrids, but cautions nothing is imminent.

The auto maker is involved in Britain’s Limo Green program and working with Lotus plc and others to develop an extended-range electric vehicle, but that is “still some years off,” he says. A version of the Lotus hybrid powertrain was shown in a Land Rover concept at the Frankfurt auto show last fall.

“We’re actively working on an electrification program,” O’Driscoll says. “I think we do need one, but right now these are test cars in the market. I don’t know if there’s a whole lot of consumer demand for them right now.”

While O’Driscoll doesn’t forecast precise volume, he says sales should rise in 2010 thanks to the fully revamped lineup and expected increasing demand in the U.S.

Western Europe should be a tough market this year, he says, while Jag’s sales in China, where it has operated for only four years, should double for the second year in a row to about 4,000 units.

Last year, Jaguar sold 11,955 cars in the U.S., down 19.4% from 2008 levels. The XF accounted for 8,487 of the total.

Profitability, which escaped Jaguar throughout much of its time as a Ford subsidiary, is unclear. O’Driscoll says the auto maker was in the black on an EBITDA basis (earnings before interest, taxes, depreciation and amortization) in third-quarter 2009 and that Jaguar continues to look for ways to lower its breakeven point.

Last year, the auto maker “took 2,500 people out of the business and cut our costs significantly,” he says. “And we’re still in a tough economic condition, and we’re going to have to take actions that are necessary and respond to the marketplace.”

O’Driscoll would like to expand Jaguar’s lineup, noting a sedan slightly smaller and a bit less expensive than the XF and a new sports car would look nice on showroom floors. It is unclear whether either of the cars could be derived from existing architectures.

He says there’s no game plan for the sedan and demurs on offering any further details about the sports car. However, the Jaguar XE roadster, unveiled in concept form at the 2009 Geneva auto show, is expected to hit the market in 2011, coinciding with the 50th anniversary of the legendary E-Type.

“The good news is there’s a lot of opportunity,” he says. “But I think it’s absolutely essential that each Jaguar stands apart from the competition. What we can’t do is simply build cars that compete with other big-volume sellers in the marketplace. Each must have its own unique position.”

Here in the U.S., Jag will stand pat on its 170-dealer sales network, including 30 stand-alone showrooms, but it is encouraging – not requiring – pairing of Land Rover and Jaguar stores under single ownership. About 50% of its network is dualed with Land Rover.

“Combining makes sense,” O’Driscoll says. “The two brands are compatible. The vehicle lines don’t compete, they complement. We’d love to put an XJ and a Range Rover in every garage. Having our dealers have both franchises works very well.

“(But) it’s an evolutionary process, and our dealers have to make that determination for themselves.”

Jaguar and Land Rover are enjoying a faster-moving, more independent and entrepreneurial existence under Tata Motors Ltd. ownership, O’Driscoll says.

But while Tata was instrumental in the opening of Jaguar’s first dealership in India a year ago in Mumbai (a second one will open this year in Delhi), he doesn’t envision any other synergies between the two companies, and he has little to say on whether Jaguar could help Tata with its plans to sell the tiny, low-cost Nano in the U.S.

“That’s not why Tata Motors bought us,” he says. “They bought us because they have a lot of respect for the brands, the heritage of Jaguar and Land Rover, and because they believe there’s an opportunity to realize the true potential of both brands.”

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