Not a penny of taxpayer money for Jaguar, please

Jaguar does not need state subsidy. It needs more customers. Management needs to have more feel for the brand and for what people want from it. I want the management to fight successfully in the market place so the jobs can be saved. My thoughts are with the employees. There can be no future for their jobs if they need to rely on state subsidy rather than customer income.

When I was 36 I acquired my first Jaguar. I was appointed Chairman of a big quoted industrial group of companies. The large black Sovereign saloon came with a chauffer to pick me up for the first day’s work.

The only reason I got such a job was the Group had been bid for. During the course of the bid the Board had signed up to a stretching profits forecast for the forthcoming year. The defence worked, but shortly afterwards my predecessor as Chairman fell seriously ill. The Board asked me to take over, as they thought it unlikely anyone would want to come in from outside to deliver the profits we had promised. I recognised we needed to raise revenues and cut costs to meet it. I also realised I could guarantee to cut the costs, but could not guarantee the extra sales.

So I cut the Chairman’s salary, sold the company aircraft, placed the pilot with the new buyer of the plane, and sold the company flat in the West End. Armed with moral authority from cutting my own perks and pay, I then persuaded others to cut their costs in turn. We made the profits forecast easily and went on to hit 37% return on capital. The Jaguar was the one luxury which I kept. I asked the chauffeur to do other things for the company when I did not need him for company business trips, which had the side effect that I could drive the car as well. It began a love affair with Jaguars which lasted for a long time.

I was fortunate to inherit an older Jaguar saloon when I made it to the Cabinet. It wasn’t as good as the company one I had enjoyed, but it did have some style. I restrained officials from buying me a new Rover to replace it, managing to combine my enthusiasm for careful control of public spending with the happy outcome that I could keep a Jaguar in government that I had got used to in business. On leaving government I just had to find the money to own and drive a Jaguar myself.

At the end of the 1990s as Shadow Secretary of State for Trade and Industry I was asked to be one of the people who turned up to admire the then new Rover at the Birmingham Motor show. I did so, and gave favourable comments to the press. I also saw the new S type on the Jaguar stand. I was so glad they did not ask me which car I would buy. I thought the flowing lines of the S type were superb. Whilst it had a hint of the 1960s icon Jaguar, it was a thoroughly modern car. Place them side by side and they are very different.

Until recently I have been happy with the brand. I am now not surprised to read that Jaguar are struggling. They have made mistakes with the way they design, present and project their cars and handle their customers.

I was first mildly worried when I visited the Jaguar Formula One outfit shortly before they gave up. They were spending too much for comfort, but not enough to win. It was difficult to see why they did it for so long. Wouldn’t it have been better to have raced modified production cars in a cheaper competition, and achieved a higher standard?

The launch of the X type was not a comfortable time for the company. Many traditional supporters of Jaguar did not see it as a good addition to the range. Jaguar compounded the error by trying to persuade owners of more expensive Jaguars to switch to their new cheaper product! That was a great way of trying to cut the margins and turnover.

More recently the Group has been spending substantial sums on market research and questionnaires. I have bothered to fill a few of them in, but developed an increasing frustration when I realised they were not listening. They were not understanding the answers and were not communicating back. I explained several times that I was not yet persuaded by the design of the new XF. The windows are small, the back is very high, the width is narrow, and the radiator grill looks like a mini Bentley gone wrong. They have lost the classic elegance of many of the best Jaguar designs. I bought one of the last S types instead. Now I am being bombarded by requests to buy the XF as if I have never expressed an opinion on it.

Worse still, somehow the press picked up a negative line about those of us who had bought S types when the XF was launched. We read that the S type was old fashioned and stodgy. The all modern exciting XF was designed to sell to the younger executive, a new breed of Jaguar buyers, people who had been buying BMWs. Well if that is the case, why do they wish to sell one to me, having insulted me? What compelling deal or argument can they put to me to say sorry, if they want older Jaguar fans back? I did not see myself as old fashioned or stodgy for buying one of their cars.

The reason Jaguar is struggling is it does not have enough customers. Yes, it had to widen its customer base. No, it did not have to do that by upsetting the existing supporters. Jaguar does not need a public subsidy, it needs a stunning successor to the XJ, possibly a remodelling and relaunch of the XF, and some much more astute marketing to reposition the brand comfortably, so it can reclaim its old supporters whilst winning some new friends.

Political parties could tell them a thing or two about the need to win over new friends without losing the core support. Comments like “the new Jaguar is styled specifically to shed its stodgy British lines” and “No more for Jaguar the relentlessly retro approach that is perceived to have done the marque no favours at all in modern times” must have come from briefing close to the company. It is undermining perceptions of their previous cars, never a good thing to do given that many likely Jaguar new car buyers have probably owned one before.

It would be so 1970s to go back to subsidising car makers. In those days the more the government subsidised, the more the state aided companies lost market share. The car companies came to see the government as the main customer, as they sought cash from them, whilst the foreign competitors got on with designing and building cars that individual customers wanted to buy. It was a disaster. The UK fell further and further behind the best of modern car design.

Surely even this government must see the folly of subsidising a foreign owned company to make luxury cars to sell to people with good incomes or money in the bank? And can’t the top management of Jaguar start listening to their customers, instead of contracting that out to consultants who manage to make a former Jaguar addict like me hopping mad with the way we are being treated? I am all in favour of the company innovating, and recognising that time moves on and perceptions of beauty change. What I cannot accept is clumsy “repositioning” in a way which makes former friends uncomfortable with what the Group is doing.

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24 Comments

  1. Ian Jones
    Posted December 19, 2008 at 9:46 am | Permalink

    Its not so much that its foreign owned that annoys me, its the fact its owner is touted as a billionaire with houses, planes, boats etc etc. If he wants money to support something he has bought then he can sell something, why should the taxpayer bail them out!!! Its not like most taxpayers can afford a Jag anyway!!!

    good to see Mandelson looking after his billionaire friends!

  2. Brian Tomkinson
    Posted December 19, 2008 at 10:06 am | Permalink

    JR: “Surely even this government must see the folly of subsidising a foreign owned company to make luxury cars to sell to people with good incomes or money in the bank?”

    You seem to have forgotten the main reason why this dreadful government would agree to this folly – the large number of Labour MPs with seats in the Coventry area!

  3. Posted December 19, 2008 at 10:17 am | Permalink

    I think the decline in car sales is more of a naturally occurring global phenomenon rather solely a British problem. I think this might have something to do with the fact people may be sick of paying taxes through the nose, taking credit and hocking themselves up their armpits each year simply to enjoy the whiff of new leather.

    So speaking for myself, I now resent the amount of tax I’m paying, I resent the duty the government places on fuel, I resent the yawning gap between money makers and money takers with the taxpayers funding the execise, and I resent a government which allows a gas guzzling, environmentally harmful machine to be sold to me on the basis that I MUST have one and I MUST get a “No deposit and Nothing to pay LOAN in order to drive their lunatic giveaway spending, when I know this is not in reality affordable, and that it, along with the money government is borrowing to carry out this spending will have to be paid back one day.

    As far as Jaguar is concerned, it seems quite obvious to me that they, like every other car manufacturer, have got to provide for the type of car people want to buy or otherwise taxpayers will be tipping more money down a drain through Mandelson’s Money Orders, when HE and my money cannot create the fundamental thing Jaguar needs which is more DEMAND. i.e. CUSTOMERS.

    Unless Customers walk through the doors of any enterprise then it is a pointless exercise it being open. Hard as it might be to swallow, Jaguar should have been producing cheaper and more environmentally geared cars to meet the NEW demand which is a global phenomenon, and the government should not in the meantime made changes to taxation so as to impact on demand. If anything, it could have taken a lead and gotten all car manufacturers together to combine their resources in some way in order to produce the motors people actually want, and made an effort to make the UK car manufacturing base a world leader.

    If there are 800,000 jobs at stake as a result of the auto industry then perhaps ‘someone’ should have thought about that when they made driving a car in the UK more expensive than any other country on the planet?

    Jaguar was plainly sold by people who were obviously capable of seeing the problem which government ( Mandeleson ) won’t. He’ll do it for political rather than economic reasons because IF decisions were made for those reason then Jaguar would now be producing Electro-Jags and Banks would be lending to businesses, and peoples jobs would be under less threat than they are now as a result of incompetent economic management by the government, stupid reporting by the media and a lack of foresight by some businesses like Jaguar and Woolies to get their business models right.

  4. AndyC
    Posted December 19, 2008 at 10:21 am | Permalink

    Sigh… I fail to see why Jaguar or any other carmaker should get a penny of subsidy, for the reasons you very rightly point out. I could also point out that the owner of Jaguar is far from poverty-stricken.

    In the space of a few months we seem to have headed right back, not quite to the 70s but to the late 60s. A devalued currency, state subsidies for failed industries, government debt out of control, rising taxes, overseas commitments we have no means of adequately meeting, and a squabbling government caught in the headlights of an economic situation of which it has no comprehension.

    So what next? My genuine worry is that at the next election we will once again swap Wilson for Heath.

  5. Adrian Peirson
    Posted December 19, 2008 at 10:47 am | Permalink

    I agree, Natural Selection must prevail, it’s just a pity that we must all suffer because of the clumsy, maniacal interferences from Govt and their Globalist co-conspirators in the market,
    I also think that Natural selection should have prevailed with regards to the Banks.
    It is becoming increasingly clear to some at least that Western Banking practices are little more than a giant Ponzi scheme designed to benefit a few Elites.
    If Govt really was on the side of the people it could have declared all loans mortgages debts etc from these Corrupt institutions as null and void.
    This would have given people significant amounts of disposable income, they would spend and no doubt buy cars.
    New Banks would have sprung up to replace the old fraudulent institutions.
    Allowing natural selection to prevail would have saved the People and our Industries, Better yet, it might have caught on in other countries.
    Gordon could then have truly claimed to have saved the World.

    Where is Cromwell when we ( and the world ) need him.

    http://www.infowars.com/infowars.asx

  6. Kit
    Posted December 19, 2008 at 10:55 am | Permalink

    “the folly of subsidising a *foreign owned* company”

    Sorry to be picky but subsidising ANY company is folly. To subsidise Jaguar the government needs to rob from other better run companies.

    • Posted December 19, 2008 at 2:45 pm | Permalink

      Which when you think about it, is a nice metaphor for socialism. Punish the responsible/successful and give money to the failed or the indolent.

  7. Lola
    Posted December 19, 2008 at 11:00 am | Permalink

    Bloody Hell, Mr Redwood, that is exactly my analysis. So that makes two of us, there must be thousands more. But, if Jaguar are short of cash because their banks have stopped lending then maybe easing that credit bottleneck is a reasonable use of our money? (BTW Mrs Lola drives an X Type and loves it.)

    And a lot of the same analysis applies to Landrover. Their brand values stem from the Landrover series 1,2,3 and Defender range. Plus despite the unsuitablity of Snatch Landrovers the military association is still critical. So why have Landrover allowed the likes of Toyota to corner markets for simple rugged 4×4′s?

  8. wonderfulforhisage
    Posted December 19, 2008 at 11:10 am | Permalink

    That’s why I’ll be voting UKIP at the next election.

  9. Bazman
    Posted December 19, 2008 at 11:43 am | Permalink

    Motorbikes tend to evolve by evolution and revolution. A series is abandoned when it cannot be improved further and a new one begun. This is the evolution of one of the original ‘nutter bikes’. The Suzuki GSXR 750 arrived in Britain in 1985 and was radical in its design, with the slogan ‘no compromise’ The 2009 one is if a little more conservative, just as mad.

    http://uk.youtube.com/watch?v=z2zTAQ9Fr_s

    Buy a Mondeo instead John. Much the same car and its to expensive to be called sir. I heard John McVicar, the 1960′s armed robber and public enemy number one say during an interview, that he would ram the security van with the Cortina and escape in the Jag. Class. Would any self respecting London gangster be seen driving a Jag nowadays?

  10. Posted December 19, 2008 at 11:57 am | Permalink

    Just as the politicians, having made the taxpayer bail out the banks is now demanding the right to tell them who to loan to, if Jaguar were bailed out by us the politicians would quickly be telling them to redesign all their cars as green electric vehicles.

  11. Posted December 19, 2008 at 12:04 pm | Permalink

    I started with a second hand S-Type, bought a new S-Type, and another, then I tried an XJS until someone ran into the back of it and I moved up to an S-Type "R". These purchases were made over the space of 8 years and without adding it up, I guess must have lost me around £40,000 in depreciation. With my last Jag I also bought 2 Defenders which I happened to fancy after seeing the 24 series and Jack Bower (?) running around all over the place in black 4×4's.

    Then I got real and decided instead to pay the remnants of my mortgage off, and retire with a Honda Civic which I bought from auction for less than 2 grand.

    I feel as if I've saved myself a load of bother by denying myself any more desires to whiff new leather and if I ever get the feeling again, I'll buy myself a new pair of brogues and keep them in the box so I can give em' a good sniff if I ever get the yearning for another Jag.

  12. Stoofer
    Posted December 19, 2008 at 1:46 pm | Permalink

    These are interesting times, as I, a committed free-marketeer, am mulling up a change of view.

    From my interpretation of what Mandelson has said (and this maybe incorrect), the “subsidy” would be in the form of an interest bearing loan. Where the problems associated with the company can be ascribed to liquidity issues due to banks battening down the hatches rather than any underlying profitability issues (poor or rapidly reducing margins) then would this not be considered reasonable?

    My problem with what Mandelson says lies in his comment:

    “If we judge that it is not just short-term difficulties but longer-term pressures that are operating in that sector, or in relation to that particular company, then we will consider what measure, what intervention we can appropriately make.”

    Which I read as an intention to step in to counter longer term problems with taxpayer money. This is definitely unwise. If the problems are a short term cash flow problem, more cash to aid working capital is a useful short term solution. Where the problem is more deep set, there is very little the government can do with my money.

    Reply: Of course I agree that the taxpayer could lend money directly against proper security if the nationalised banks are still unable to- but surely better to fix the banks as I have been suggesting for weeks.

    • mikestallard
      Posted December 19, 2008 at 7:00 pm | Permalink

      Allow me to contrast our host’s behaviour when placed in charge of a failing company with that of Lord Mandelson’s career so far. Reducing his own perks to set an example, our host tells the truth about his love affair with Jaguar and how it turned sour. Sad, yes. But also truthful and open.
      The man in charge of this possible bail-out, however, is somewhat obscure. With Mr Deripaska, I am not at all sure we ever got near the truth. And wasn’t there something else dodgy about a mortgage somewhere? Wasn’t there, too, something about Indians getting to the front of the queue with passports? Or was that someone else?

  13. Bazman
    Posted December 19, 2008 at 2:37 pm | Permalink

    If you go to France and Germany you will see that most of the cars driven in a street view are built by their own manufactures. Yeah! I know there is a lot of Japanese ones too. Renault build cars people want at a really cheap price. I suspect by illegal subsidies, and always have. As a child of the 70′s my Father drove a Renault estate cars for years. They have never been know for their build quality, but neither have Jaguar. Clearly any decision to give them money is a political one with little to do with what they build.

  14. alan jutson
    Posted December 19, 2008 at 3:41 pm | Permalink

    The sales of jaguars and most other large luxury cars were going well until last year.

    They are not now, not because of the credit crunch, but because this greedy government increased the cost of running them by introducing higher road tax, a new showroom tax and the increasing cost of petrol duty.

    They now are not getting the increased tax as the values of second hand models are worth next to nothing (so trade in values poor) if you wanted a new one. So no one wants to buy a car that will depreciate like a stone.

    The government are now being asked to subsidise the very industry they thought they could rob of some more money via increased taxes.

    The problem is they may now have to suffer the subsidy without the tax revenue. Talk about cutting off your nose to spite your face.

    no real surprise they have done it with almost every other business they have got involved in.

    lending to the Banks at 12% then expecting them to loan out the money at 2-3% no wonder its not happening.

    On another thought the new XF looks like a Lexus not a Jaguar
    No guesses which is more reliable.

  15. Derek W. Buxton
    Posted December 19, 2008 at 4:44 pm | Permalink

    Goveernment money for Jaguar, not really a bright idea when the Indian owners are going to bankroll Ferrari F! team next year.

    Derek

  16. number 6
    Posted December 19, 2008 at 8:27 pm | Permalink

    Ah, the 1970s motor industry, let us not forget what government intervention can do to save the day – the Allegro, the Marina, the Ital. I am getting misty eyed just thinking about these automotive icons that are still discussed with the same reverence reserved for Rolls-Royce, Cadillac and sundry Italian super cars.

    Time to dig out the flares, crack open a Watneys Party Seven and celebrate Christmas in the true 1970′s spirit as the lights go out due to lack of power supply on the national grid and Comrade Brown resumes tractor production (via India) at the remaining car plants.

  17. DBC Reed
    Posted December 20, 2008 at 10:04 pm | Permalink

    Rather dispiriting reading so many stalwart right -wingers slobbering over conspicuous consumption cars.And what is the petrol consumption on these things? Never mind, there will always be unemployed young men to get killed fighting for oil supplies.
    Is it really a good idea to go on producing such expensive cars in a slump? Perhaps Jaguar suffers from the same problem as the American car giants : that nobody is interested in buying the cars because they are outdated not just stylistically but because they do not fit a modern economic demographic.

  18. Posted October 16, 2010 at 11:46 pm | Permalink

    On SKY –

    “The US government is to offer the country’s ailing car makers up to $17.4bn in short-term loans – but on strict conditions”.

    Well bang goes that idea then.
    If the yanks are doing it, it MUST be right…..( He says with a puzzled look )

  19. StevenL
    Posted December 19, 2008 at 1:42 pm | Permalink

    “or do you want another great British built product to go abroad and lose all its once great stature”

    I find this misconception the British public seem to have about where a company is listed on a stock exchange being equivelent to where it is owned most curious.

    I often hear people say that Britain has no car industry, I don’t think this is in the slightest bit true. ‘Japanese’ cars are consistently rated better than German motors for reliability, so it is reasonable to say that they are the best-made cars in the world. Honda, Toyota and Nissan all choose to use the British workforce to produce some of their cars.

    Who cares if the companies are listed on a foreign stock exchange or owned subsidaries of another company that is? Anyone, in any country can buy a shares and own a piece of them.

  20. Bazman
    Posted December 19, 2008 at 3:02 pm | Permalink

    The sad truth is that no company can ever be supported by wet eyed enthusiasts. Toyota Corollas are very boring, but are a massive seller. Lexus part of Toyota are leading the way in luxury cars Honda cars are getting better. Suzuki seem to be successfully experimenting. Soon we will see the luxury Japanese car with the badge and reputation worth something. Next we will be reading about import restrictions on luxury cars. Any supporters?

  21. wonderfulforhisage
    Posted December 19, 2008 at 4:42 pm | Permalink

    I read this as a rebranding parable. I’ve voted Tory in every election since 1959 and now intend to vote UKIP.

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  • About John Redwood

    John Redwood has been the Member of Parliament for Wokingham since 1987. First attending Kent College, Canterbury, he graduated from Magdalen College, and has a DPhil from All Souls, Oxford. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.
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