Auto Industry Rumors

One Of The wilder rumors buzzing around the auto business late last year suggested embattled Ford was going to sell off Jaguar--and that Renault/Nissan boss Carlos Ghosn was interested. Turns out there was a grain of truth to the story: Sources in Dearborn confirm Bill Ford Jr. was indeed presented with a plan outlining a possible sale of Jaguar. But it was just one of three scenarios put forward in a wide-ranging strategy document. The others? Investing in the new S-Type replacement, the X250, and a reskin of the XJ sedan. And the nuclear option: closing Jaguar altogether.

The reality is Ford's not selling or closing Jaguar, for one simple reason: Either option would cost a whole lot more money than developing a new S-Type and giving the XJ a more contemporary set of panels. Besides, Carlos Ghosn has now decided that revamping Renault is a much better use of his time and money.

There's no question Jaguar, which just got $2.1 billion of the $5.6 billion Ford banked from the recent sale of Hertz, has been a money pit. Dearborn paid way too much for the company back in 1989--more than $2 billion--in its haste to beat GM to the prize. And when Ford execs finally got to do more than just kick the tires on their new ride, they found to their horror that Jaguar was far from a fully functioning auto company.

Ford thought it had bought a rival for Mercedes and BMW. Instead it found it had to spend a fortune on new machinery and new processes to simply get Jaguar to the point where it could actually build a car with any sort of consistency. Veteran manufacturing exec Bill Hayden, parachuted in by Ford to sort out the mess, once memorably reckoned Jaguar's factories to be the worst he'd ever seen, apart from a Russian tractor factory.

How bad? Not long after the takeover, Jaguar engineers sent the best-built XJ they could find in the factory to Dearborn for a quality audit. It had 10 times the faults of a Taurus. When Ford facelifted the XJS coupe in the early 1990s, it replaced the complex multipiece rear-quarter assembly on the car with a single pressing: Even if the original rear quarters were assembled within tolerance, one side of the car could be as much as a quarter inch longer than the other.

There's no question that without Ford, Jaguar probably wouldn't be with us today. But the storied British brand has yet to repay its benefactor. Muddled thinking on architecture sharing (the DEW98 platform was too expensive for the Lincoln LS, but too cheap for the S-Type; using a recycled front-drive Ford Mondeo platform for the X-Type was never going to result in a 3 Series-beater) and overly ambitious plans for volume growth have paralyzed the company for almost a decade. It's a measure of the inner turmoil that it's taken almost seven years for the first Ian Callum-designed Jaguar, the gorgeous new XK sports car, to reach the market.

By contrast, Ford's experience with Land Rover has almost been a textbook example of acquiring and growing a premium brand. When Ford bought the specialist SUV manufacturer from BMW in 2000 for $3 billion, it inherited some modernized factories, the all-new Range Rover, and a disaster waiting to happen. Although stunning, the Range Rover had cost an absolute fortune to develop--more than $1.5 billion, according to well-placed sources--and was hideously expensive to build. But the Land Rover LR3 and Range Rover Sport, developed on Ford's watch for far less money, are truly legitimate stablemates to the BMW-engineered Range Rover and are selling well.

How could the two experiences have turned out so differently? Simple: When Ford bought it, Land Rover's people understood what a 21st-century Land Rover needed to be. Back in 1989, Jaguar's people were struggling to keep up with the 20th century.