Turning chilly for Jaguar - another bailout needed

Margaret Thatcher privatised Jaguar in 1984 to howls of protest from people who liked big rusty cars that broke down a lot. Ford bought the brand for $2.5 billion in 1990, to more howls from Bufton Tufton (67) stalwart of the Enoch Powell Golf Club, Jaguar’s only customer. Sales fell to around 15,000 units a year, 75 per cent of these to the USA, in the teeth of the 1992 recession. Rework – the percentage of cars requiring repair at the end of the assembly line – was running at 65%. Productivity and quality control was as bad as in the strange days when Jaguar was merged with British Leyland, a state-owned basket case whose models gave Lada a market opportunity in the UK. Ford invested heavily in reskinning the big Jaguar XJ series, replacing almost 2000 components with ones that worked and drove through innovations such as stopping the cars from leaking, locking the passengers inside against their will and not starting. Jaguar had borrowed heavily from the bank of goodwill during its dark years. Ford fixed the reliability problems but the marque was always running on empty – its core market was middle aged CEOs who played golf and sat in the back and racy middle-aged cads who bought its expensive XJS sports car. Jaguar needed mid- and entry level models to expand its demographic, as we marketing mavens tend to say.

Inspector Morse investigated murders in a MK2 Jag - he was often late arriving at the crime scene, but always did so in style.

Ford, exemplary owners, made good their promise to the Midlands carworkers who loved the brand they could never afford to own, invested heavily in retooling and added a midrange S Series car, a beautiful vehicle, reminiscent of the iconic Mark 2 Jaguars made famous by Inspector Morse, designed to compete with the BMW 5 series. They also, less successfully, designed an ‘affordable’ Jaguar, the X type, to compete with the BMW 3 series, and replaced the horrible but ferociously fast XJS sports car with the beautiful, (relatively) affordable XK series, designed to compete with Porsche. 

John Major knew the wily ways of the Indian. Oh yes. Bring him back forthwith.

The trouble was that they didn’t address the fuel economy issues or introduce diesel versions of these cars until too late, largely because the US still has an irrational aversion to diesel passenger cars and the Jaguar market didn’t care about gas guzzling. Thus the big Jags couldn’t compete with Mercedes (or Lexus), the middle sized Jags couldn’t match BMW (or Lexus) and the baby Jags couldn’t compete with anyone, because they were too dear, too thirsty and had an uneconomical and pesky 4 wheel drive powertrain borrowed from the Ford Sierra and other ‘platform-sharing’  features which seemed designed to cause trouble. Ford needed at least 200,000 sales for the marque to be viable and a much larger percentage of European buyers. They never really got consistently close. There was also a problem of perception. Although Ford hived its “premier brands” such as Jaguar, Lincoln, Volvo and even Aston Martin into supposedly autonomous units, brand afficionados found it incongruous that Jaguar was owned by the Great Satan of mass engineering and there was no real economy of scale or opportunity in cross-selling a Fiesta with an XKS. The marque made progress but never really capitalised on the $11 billion which Ford spent rejigging and making new models. The impressive new Jaguar XF emerged just as the global downturn was starting and Ford’s own core business was in terminal decline.

Tata, one of India’s top three agglomerates, if not its biggest, stepped in to buy Jaguar and Land Rover/Range Rover, owned for a time by BMW but sold in 2003 to Ford, for $2 billion, more than half the price that Ford paid for the two marques, not counting the estimated $11 billion which Ford invested: a bargain, in fact. The deal was formally announced in March 2008 and 16,000 jobs were said to be saved as a consequence.

Ratan Tata, owner of Tetley Tea, Corus steel and Jaguar, may soon go on UK Benefits, courtesy of Lord Hinduja of Mandelson

So riddle me this riddle, Lord Mandelson of Hinduja: why should the British taxpayer step in to subsidise or part-nationalise a company owned by one of the world’s richest men and biggest agglomerates to the reputed tune of £1 billion – equivalent to the price Tata paid, in fact? Yes, we know about the 16,000 jobs, but Tata (company motto ‘Leadership with Trust’) is a global player, employing 350,000 people, bigger than any British manufacturing concern. Chairman Ratan Tata is a global philanthropist  and the group is seen as a model of ethical manufacturing and corporate citizenship. 61% of its $62.5 billion revenues come from outside India. Tata should not need help from the British government. We would laugh if Honda, Nissan or Toyota, all undergoing severe problems and bigger UK employers than Jaguar, were to be proposed for state intervention. If Tata gets help then where does the government draw the line?

Moreover, they don’t appear to be that broke. Today, when even Honda is stepping down from toys for the boys stuff for reasons of cost, it was announced that Tata would sponsor Ferrari in Formula One Racing. (Tata have a joint venture with Fiat, which owns Ferrari, to make cars in India). The company has a long and largely well-deserved reputation for ethical practice and global citizenship (yes, I hate these terms too but I’m pretending to be a business analyst today) but threatening to move production of Land Rover and Jaguar away from Browns Lane and Solihull unless the increasingly bonkers Brown trousered brigade grant unfair subsidies will incur horrid karma in the next life – Mr Tata may come back as a broken-down Jaguar or a Solihull shopkeeper.

Jaguar fitters like these made the company what it is today

If the vehicles can be made cheaper and better in India – I’m sure the land Rovers could – then get on with it. (Land Rovers are already made in local markets). If moving the entire production away from Britain was what Tata had in mind all along, then ditto, but I doubt if cheap labour will necessarily make expensive, complex cars: BMW and Mercedes, the world’s most successful prestige auto brands,  for example, operate in the world’s highest cost labour market. Also, if Ford found it difficult to sell a premium luxury brand under its umbrella, then the maker of the world’s cheapest car might find it even harder. For what it’s worth, my advice would be to leave the high end manufacturing where it is; the cars are good enough now, the market isn’t. Since Tata already makes the world’s cheapest car, the ‘Nano,’ however, invest in the development of electric vehicles for Europe here (not bloody Ferraris) and keep a respectable distance from Lord Mandelson, who has an unfortunate history when it comes to Indian oligarchs.

PS. Thus has an audacious plan to manufacture a hybrid version of the Sinclair C5 and the DeLorean. We’ll call it the DeCVe. We need a lot of cash or we’ll sack ourselves and move to Eastern Europe or India.

John J Kelly

I made a rare visit to my bank last week, and was reminded why. I needed to send £62.00 to Switzerland. After a lot of wasteful form filling, I was charged £20.00 for this ‘service’, which will take 4 working days to process. The exchange rate is likely to operate on a 1.5 – 2.5% spread. The total transaction will be close to £100.00. Adding injury to insult, the bank called me and asked for ‘further proof of identity,’ despite giving them my card  and pin number, both of which they had issued. Some of this idiocy relates to the belated money-laundering regulations imposed at the behest of America and the EU (to which Britain, but not its financial system, sometimes belongs) after some British banks had scooped up most of the Russian mafia’s savings accounts. Part of it is endemic ignorance, inefficiency and extreme parochialism, but mostly it’s just routine gouging.

From Williams and Glyn's to RBS to HMG to Carey Street

I have been a customer of this bank since 1973 when it traded under the reassuringly Victorian name of William’s and Glyn’s, originally a Manchester bank I believe. I was attracted by the promise of an ‘alternative’ to big banking (no surprise there) but saw it morph from the smallest to the largest, most leveraged, most greedy and now most government-owned. I didn’t move because I thought the rest were probably just as bad, knew that some were worse, but not because it ever tried to reward my loyalty. The abiding reason why Royal Bank of Scotland’s shareholders failed to snap up its second rights offer this year, forcing the government to underwrite £14 billion of our money, is related. Apart from paying far too much for both NatWest and ABN Amro with little evidence of real synergies, the RBS policy of gouging and bullying its customers once it became a giant, proved unsurprisngly counter-productive. Natwest owns Coutts, bankers to the Queen, who enjoys a more personal service than most, with an ATM machine in the basement of Buckingham Palace. Presumably the recession will mean that she will also receive a personal professional beggar in blankets to moon about outside said cash machine, asking for spare change. I digress, but I have always found this puzzling. The smallest denomination of currency these machines dispense, if you can find one that works, are £10.00 notes, not change. Given the shaky state of RBS finances, HM might be well advised to switch to GiroBank or the Post Office Savings Bank. They will probably give her a free plastic piggy bank or install a box in the basement with a bloke in it pretending to be a cash machine, handing out readies.  

RBS was good when its core business was personal banking. As things stand, the government has bought another turkey, which moreover operates back office banking for Tesco, Sainsbury and several of the other quasi-banks that have sprung out of our ‘vibrant retail sector,’ not to mention retail insurance (Direct Line) and mortgages. This will not be its last cash call. Break this monster up, give the Dutch their own busted bank back and repay the taxpayer as quickly as possible.  And encourage our banks try and at least pretend to be interested in Europe.

PS. Consider buying RBS shares if and when they get below 40 pence, if you’re into that sort of thing. Their asset value is greater than that and in the hands of decent managers the bank, if broken up, could thrive anew. The Tories are bound to sell them back to the markets, if only to ease the debt burden, which means 2010 at the latest. Bradford and Bingley and Northern Rock were should have never demutualised and both were mismanaged by oddfellows. HBOS is a puzzled entity, a mixed marriage between Bank of Scotland, a commercial bank which had few retail branches in England, and Halifax, once the UK’s largest building society.  Halifax were very inexperienced and bad at banking, while BOS were not adept at small scale mortgage lending. Result: misery. Their shares are probably a bargain at around 55 pence on the promise of a divorce. You’ll need to wait a couple of years to see a return, though. The FT SE100 index is likely to fall below 2600 in my opinion, as people are forced to liquidate whatever equity they have. On second thoughts, don’t pay any attention whatsoever to me, or to financial journalists, who are mostly feckless layabouts or blowhards. Play ‘share picking’ monopoly in your head and mentally kick yourself when it all comes true, banks are valuable again, the sun still rises in the morning and the sky didn’t fall in.

Shlock horror - art prices have tanked

Sotheby’s shares lost 80% of their value since January 2008. The bank of Ponzi has stopped printing Mickey Mouse currency for idiots to buy pickled sharks at loony prices on the greater fool market. Why are we not surprised? It’s deja vu all over again (pace Sam Goldwyn). Although the media have focused on the lunatic fringe of the contemporary art market, high ticket trophy art from all periods has taken a dive. Portfolio magazine reported that ‘last month Sotheby’s withdrew Picasso’s Arlequin (1909), which they valued at more than $30 million, “for private reasons.” But the 1991 crash, for example, was worse than what we’re seeing (so far). Milkman-turned Aussie oligarch Alan Bond’s folly in paying $US 53.9 million for Van Gogh’s Irises (1889) back in 1987, (Sotheby’s lent him half the price paid) landed him in gaol, not for paying too much for a painting, but that particular unauthorised purchase drew attention to his recklessness. Four months earlier, a Japanese bank paid £30 million for the earless one’s Sunflowers. A Japanese collector, who coincidentally also went to gaol, notoriously paid $100 million in 1991 for a clutch of above-average but largely ‘squint-free’ Expressionist paintings, just as the world, and, belatedly, Japan, convulsed into slump.

Despite Damien Hirst’s claimed success in shifting a pile of stuffed animals, skulls and dots at an unprecedented public auction in September (some of which was allegedly bought in by his own intermediaries and collectors), October public sales of contemporary art in London missed minimum forecasts by up to £30 million. Though pre-sale estimates were largely established before the financial crisis, art valued at millions went unsold. A rare portrait of (artist) Francis Bacon by Lucian Freud went under the hammer for over £1.5 million less than expected.

The rubes had all but evaporated at the 2008 Frieze Art Fair, normally a babble of hot air. Piles of untidy bric-a-brac, reminiscent of an art show by the mentally challenged, languished reproachfully at the Zoo Art Fair. Nobody bought the installation of a naked bloke screaming curses in a greenhouse, or the witty father and child crossing the road with full-sized plaster cast adult genitals stuck on their faces, much less Garbage Bin with Protruding Spotty Dog’s Arse.

Will all those dealers have to find proper jobs selling London Bridge to tourists? Will this trickle down to the black turtleneck market? What about the taxidermists? Will Yayoi Kusuma need to resort to Care in the Community? What will this mean to the average family struggling to stay afloat in a rising tide of recession? Nowt.

So why am I telling you this? Because hubris is fun, should be instructional, but invariably isn’t, otherwise there wouldn’t be any more hubris. The fine art market in general is not doomed. Emerging artists won’t rise so stratospherically: most didn’t anyway. Good work will always sell to people who want it – extraordinary work even more so – but for the next five years, none of it will move as easily or at anything like the steroid prices largely generated to give people the illusion that they were ‘creating’ an elite, upwards-only market. Artists such as Hirst, Cattelan, Emin, Koons, Murakami, Prince, Taylor-Wood, investor-collectors such as Saatchi and dealers such as Gagosian understood how to manipulate the market and may indeed have done so, partly for art’s sake, but the game is temporarily up.

I’m telling you this because a lot of public museums lost the opportunity to buy or keep important works during the latter stages of this madness, not because a bunch of Houyhnhnms might have overpaid for well-executed emperor’s suits, but because it proves that false markets can, and will fool some of the people all of the time. It is worrying that some of those buyers were custodians of vast equity and finance market investment funds, and perhaps not surprising that they weren’t good judges of the art market either.

To show you how little I care, you’ll find me at Crunch, Art in a New Era, at Hay-on-Wye, from 28-30 November. Needless to say, they haven’t invited me to talk, but I’ll be there to hear my friend, the magnificent brooding genius Patrick Hughes whose work is cheap at twice the price, kick out the jams and épate the (Louise) Bourgeoisie.

Now I hate all the guilt and the wringing of hands as much as the next person, partly because I think it’s displacement activity, if we are not going to do something about it, then we may as well stop pretending and get on with enjoying ourselves. But there is an issue of political imagination in all of this. Every time we make statements about the planet, or about “life” or being human, we are also making statements on behalf of these people. People who probably don’t speak English and so don’t have any access to our elite discussions.

We depend upon these people, they make our cheap Chinese goods possible, and fuel the service boom in India. In many ways they manage inflation on our behalf, since they are, well, so cheap. Since we depend on these people, if we want to chart a political future for ourselves that is stable, then we need to take into account the realities of their lives. Take the food price crisis: How much have we spoken about the price of milk in Tesco? And yet how little have we discussed the possibilities of food riots? The last trade round fell on this point: The developed world just could not get their heads around the developing world’s insistence that their population had to eat, come what may.

In order to have an accurate political imagination, to help us chart our way through the turbulence of climate change, and avoid crunching on the rocks of natural resource shortage, we need to think beyond our discussions where we mostly talk about Us. We also need to get beyond the current war-time mentality where we think about Them as terrorists or usurpers. We really do face tests that are way beyond what our current mentality is geared up to. Thus we need a new political imagination that is beyond Them and Us.

We have very few rules apart from good taste. I won’t publish racist, sexist, bigoted or spiteful stuff. Pass this url to everyone you know. Tell them it’s not about THem and US. Let’s have a revolution and let’s have it for fun.