Tuesday, 12 June 2007

Selling Jaguar and Land Rover - what does it mean for Ford in the UK?

I'll return to this subject again - there's a lot to say about how Ford ended up where it is today, who might buy these established British car-makers, and what their future prospects may be, but I'll restrict myself to one or two observations on the Ford rather than LR/Jaguar side of things for the time being.

If Ford really does end up selling Jaguar and Land Rover, that will mark the end of the US company as a big manufacturing presence in one of its best national markets for the first time since it came here in the inter-war period. Ford caused a stir a few years back by running down all production of Ford-badged cars in the UK (although the Transit is still being built in Southampton) but this was always balanced by expansion at Aston Martin (already sold), Jaguar and Land Rover. Apart from that, it's all engine production.

I've long maintained that the British are the world's first genuinely post-patriotic consumers. We really don't care that much where our cars are built, and give home players little or no preferment. Government procurement here is the same; our public authorities seem to be genuinely open in their buying, in a way that those of no other country are. The Ministry of Defence, for example, gave a huge truck contract to MAN not long after that company had effectively closed the UK truck-maker ERF, rather than go with other options such as a rival consortium including LDV that could have revived military truck building as an industry in the UK. That's all the more remarkable given that EU rules on open procurement don't even apply in the case of military contracts. The police seem to buy just about anything in preference to our home-grown cars, as well.

Ford twigged to this early on and suffered no real penalty when it ended UK production of cars bearing its own name. I wonder, though, whether with the sale of Jaguar and Land Rover, Ford is now testing this to the limit. When GM announced a month or two back that Ellesmere Port on Merseyside had been selected as one of the plants that would make the next generation of Astra, for example, it said, to my surprise, that UK production was still probably worth some market share here, even if the advantage was only one or two percentage points.

Of course Ford needs to keep its production costs down, which is why it has shifted the manufacture of Ford-badged cars to other countries (although why high-cost, low-flexibility Germany, where Ford's cars are a lot less popular than they are here, should be a beneficiary, I still cannot understand). But the main reason this is an issue is that mass-market badges like Ford can't really support decent pricing these days and need some sort of 'story' to keep themselves in the public mind, as well distinguish themselves from lots of other purveyors of cars as domestic appliances. The worry for Ford must be not so much that British buyers will suffer a sudden attack of patriotism and shun Ford products - more that factors like local production and links with fancier brands like Jaguar and Land Rover probably still help a bit in terms of generating press coverage and interest in the company, and this is being lost.

Without that sort of stuff, Ford is competing with no particular entrenched advantage, except perhaps the extent of its UK distribution network, against companies like Kia, which, with its generous warranties and low-cost production facilities in Eastern Europe, has a strong story of its own with which it can capture car-buyers' attention.

The footloose pragmatism of the British car-buying public is probably a double-edged sword for Ford. It meant we didn't decide against its products when blue-oval car production was ended in the UK, but it also means we won't hesitate to switch to something else that comes along if that looks more interesting. So far, the excellence of cars like the Focus has held the threat at bay. But it's going to get harder in future, I think.

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