Jaguar X-type: gone in ’09
If you want that Jaguar X-type, you’d better grab onto that 2008 model described here earlier, because there won’t be a 2009 – at least not in the United States.
Of course, you probably don’t want an X-type, which is why there won’t be a 2009 model sold in the United States. Ford had been expected to keep the car on the U.S. market until 2010, but it is dropping it sooner because the sales have been just terrible. The best sales it ever had were 5,000 vehicles in 2003. It’s down to less than 2,500 a year now, even though a wagon has been added to the line.
So, Jaguar isn’t going to let the X-type weigh down the line when it introduces the new XF to the United States in March. At that point, it pulls the plug on the X. They will continue to sell it in Europe, in a facelifted version. But that version will not cross the pond.
A Jaguar spokesperson explained it this way: “Over the past 18 months, Jaguar has been conducting a strategic review of its positioning in the premium luxury market and there were a number of unique circumstances in the North American market."
In short, Jaguar is expecting to sell 5000 XFs per year in the United States, and doesn’t want anything to mar the upscale image which they intend for that car.
The decision to pull the X-type from the United States market in 2009, despite the face-lift it will be receiving, is interesting on another level, as well. Ford has been actively trying to peddle Jaguar for months, although it hasn’t seemed to get much forward progress toward an actual sale. Ford has said that it can live with a UAW contract that is similar to those signed at GM and Chrysler. Now that the Chrysler deal is done, Ford presumably can feel relatively confident about the structure of the contract it is likely to be signing.
The latest speculation is that Ford may be rethinking the entire Jaguar sale idea. Here’s why:
First, the Jaguar/Land Rover sale isn’t going to bring Ford the amount of money they had originally expected. The bloom is off the rose for big money equity-fund deals. Most of the ostensible buyers don’t really know if they can find the money needed to complete the purchase at any price. The only potential buyer with actual money in the bank, Tata, has publicly stated that it has set aside $1 billion for the purchase. That’s a lot less than Ford wants and nowhere near what it originally expected.
Second, assuming Ford gets a settlement with the UAW that emulates those of the other automakers, Ford may not be feeling as financially pinched as it had feared. Given the smaller amount of money to be realized from a sale of Jaguar/Land Rover, the calculus supporting the sale may have changed.
Third, the XF: Ford has paid for that car. They have put up all the money to design and manufacture it, right to the point of putting it on sale. Even were they to sell the company tomorrow, they’d probably still be putting up the money to bring the car to the U.S. market. The only thing they’d save by dumping Jaguar at this point is the merchandizing costs.
If the XF is a success, selling Jaguar now would mean that Ford pays all the development costs and the buyer gets all of the profit. Presumably, if Ford didn’t think it could sell the XF, they wouldn’t have built it. Of course, you could say the same thing about previous Jaguar models. But, it would be hugely embarrassing to current Ford management were they to sell Jaguar for not very much money just as it was stepping up to the plate to hit an XF home run. Sorta like trading Ruth to the Yankees.
On the other hand, deciding not to sell in a bad market is a perfectly defensible management decision. Economists look at financial decisions in terms of “opportunity cost:” if you do one thing with the money, that means you can’t do something else. So, if you buy that new Ferrari, you won’t be earning interest on the money and you’ll lose the chance to double your money in gold futures. Looking at the opportunity cost of keeping Jaguar, there isn’t much. Ford’s got a huge credit line which it hasn’t touched. If it needs $1.5 billion, Mulally can get that with a phone call, no questions asked beyond “to which account would you like that deposited, sir?” Achieving that flexibility is precisely why Mulally mortgaged the company to secure that credit line.
In the end, Ford may be coming to the conclusion that it really doesn’t have much choice in the matter, it’s either keep Ford or give it away. Though Jaguar has been a financial black hole for as long as Ford has owned it, the lesser of the two unpleasant choices presently facing Ford may be keeping a Jaguar in its future.