Revitalised Jaguar finds its range and joins the fast lane

The luxury car maker is aiming for a much bigger bite of the market. David Bowen reports

AT LAST, good news from Jaguar. In August, the big month for British car sales, the Coventry company outpaced every other maker, registering a 71 per cent rise in a market that managed to creep up by only 3.6 per cent. In the year to date, British sales are up by 39 per cent - again leading the pack by a mile - while exports have done even better. In the first eight months of the year, Jaguar sold 27,566 cars worldwide, 42 per cent more than in the same period of 1994.

This would be good news for any company. For Jaguar, and its owner Ford, it is a massive relief. Since the companies got together in 1989, Jaguar has drained pounds 770m from Ford's coffers - on top of the pounds 1.56bn purchase price. When investment costs are added, Jaguar's total cost to Ford is close to pounds 3bn - roughly what it would have to pay for British Aerospace.

Jaguar stopped losing money about a year ago and is likely to make a pre-tax profit of about pounds 70m in 1995. But, as Jaguar and its masters in Dearborn, Michigan, know, it is premature to hang out the flags. It may have squeezed through the recessionary chicane, but its rivals, Mercedes, BMW and Toyota-owned Lexus, are still way out ahead.

The rise in sales, although encouraging, is not as spectacular as it first appears. Luxury car sales everywhere have been recovering from a desperately low level, and Jaguar has been riding the wave. Some of the recovery is also linked to the weakness of sterling, especially against the yen. Sales in Japan, the company's fourth biggest market, have leapt by more than 60 per cent this year.

Most importantly, a new XJ6 saloon was launched last September. "You would expect to see a big improvement after the replacement of the main product," says John Lawson of specialist consultancy DRI/McGraw-Hill. The sales surge and the profits turnround are, he says, just the beginning of a long haul to catch up with the competition.

Jaguar has not been strong since the 1960s, when the E-Type and Mark Two captured the hearts and wallets of so many people. Even though the XJ6, launched in 1968, has always had many desirable qualities, it has had its share of undesirable ones, too. Under British Leyland in the 1970s, the build quality was shocking and after the newly privatised company launched a totally revamped version in 1986, it was almost as bad.

Although sales were strong in the late 1980s, and shareholders did well when Ford bought the company in 1989, Jaguar's manufacturing problems were never solved.

Ford's cavernous wallet, combined with a tough management under Nick Scheele that has slashed the workforce from 12,000 to 6,500, has now solved most of these problems. The residual militants have been given their P45s, and Jaguar's factories are now run on more or less modern principles.

But the fundamental strength of any car company is its range - and Jaguar's has many weaknesses. It consists of the elderly XJS sports car and the XJ6: two specialist vehicles rather than a coherent line-up to take on BMW and Mercedes. The BMW buyer can graduate from the 3-series to the 5-series to the 7-series as he clambers up the greasy pole; if the potential Jaguar buyer does not want a luxury sports car or a sleek but thirsty saloon, he has to look elsewhere. For all its charms, the XJ6 is limited by its history. The modern Jaguar XJ6 is a different car from its 1968 ancestor, but it looks similar and has more or less the same dimensions. "Its main drawback is its space efficiency," Mr Lawson says. "The car hasn't quite kept pace with some of its competitors." A long wheelbased version is now available, for pounds 3,000 more, but the basic weakness remains: the range, and therefore the sales, are limited.

Jaguar is now starting to tackle this. The first stage will be to launch a replacement for the XJS next September.

The aim is to bring sports car sales back to their 15,000-a-year peak level, and those who have seen prototypes of the new car say that should be a cinch. Its stunning looks will, Jaguar hopes, provoke the same reaction the E-Type did on its unveiling - a standing ovation.

Next, and most important, will be the introduction of a smaller saloon in 1998 or 1999. Codenamed the X200, it will take on the BMW 5-series and will mean Jaguar can offer an alternative to two of the three body sizes produced by the German company.

In June, Jaguar said it intended to spend pounds 400m on its Castle Bromwich plant in Birmingham, where the new car will be built. The announcement followed a decision by Ford to give the go-ahead to UK construction, having muttered for years about building the car in the US.

Some of the muttering was designed to persuade Whitehall to cough up pounds 80m of public funds, but there is no doubt Ford did have a strong argument for building in the US.

The X200 will share its "platform" - the modern equivalent of the chassis - and many components with a new large Ford being built in Michigan. Although it will look and feel quite different, both cars could easily be built on the same line. "It was realistic to make it in Michigan," Mr Lawson says. "But there was a strong preference for making it in the UK."

As well as bringing in an estimated 6,000 direct and indirect jobs, the X200 will bring to the Midlands factories economies of scale that should reduce their costs and so safeguard their futures.

With three models, Jaguar's production could rise to at least 100,000, against 40,000 now.

Next, Jaguar will have to replace the current XJ6. It had neither the time nor money to tackle its intrinsic shortcomings, particularly the lack of interior space, with the latest revision, but the next generation could see a fundamental change.

Eventually the company may even produce a compact model to compete with the 3-series BMW, and so flesh out its range. But that prospect is distant enough to be restricted to doodling on drawing boards in Coventry, and perhaps to the idle tapping on calculators in Dearborn.

If it ever comes to pass, though, the Jaguar division of Ford will for the first time ever be a real automotive force.