Is Jaguar an Endangered Species?

As Ford looks for a buyer for its troubled luxury marque, its latest vehicle aims to take Jaguar back upmarket. Critics say the design isn't radical enough

by Gail Edmondson

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A dense crowd eyed the new Jaguar XF four-door coupe as it was unveiled at the Frankfurt Auto Show (BusinessWeek.com, 9/10/07) earlier this month. Under hot, glaring spotlights, skeptics circled the car slowly with furrowed brows, castigating the design under their breath as "Lexus-like." Enthusiasts praised the four-door coupe's classic proportions and contemporary lines, jumping behind the wheel to check out the interior. "It's a very interesting car. It will either be loved or hated—there is no middle ground," says Garel Rhys, professor of automotive economics at the University of Cardiff in Wales.

The modern-looking XF is a bold and risky bet. But there was little strategic alternative. After 18 years of failed attempts to revive Jaguar and billions of dollars in losses (an estimated $715 million last year alone), parent Ford Motor (F) gave its designers greater freedom than ever before to reinvent the look of one of the world's most heritage-rich automotive brands. With sales in a tailspin and no turnaround in sight, Ford gave the nod to make Jaguar decisively modern. "Jaguar is playing its last card—and it's the modern card," says the chief of design for a European premium automaker, who studied the car at the show and asked to remain anonymous.

The break with its design heritage comes at a particularly delicate moment. Due to Ford's $12.7 billion loss in 2006 and a shrinking market share in the U.S., Chief Executive Alan Mulally announced in June it was exploring the sale of Jaguar and Land Rover, two of Ford's three remaining premium brands. Ford sold Aston Martin last year for $848 million to a consortium led by motor racing entrepreneur David Richards, and analysts believe it may sell Volvo as well—exiting the premium car business altogether.

Upmarket and Into the Future

Potential bidders for Jaguar and Land Rover include private equity groups Cerberus Capital Management, which recently bought an 80.1% stake in Chrysler; Ripplewood Holdings; and One Equity Partners (One Equity's managing director is former Ford CEO Jacques Nasser), as well as India's Tata Motors. Fiat Auto Group, which has a production joint venture with Tata in India, said last week it would provide management assistance if Tata won the bid for Jaguar and Land Rover.

Ford expects to wind up the sale of Jaguar and Land Rover as a unit by yearend, so Jaguar's new owner will be betting on the design shift heralded by the XF before it's clear whether the car is a hit. Auto-design experts generally praised the strategic decision to break with a retro look for Jaguar—as well as the brand's move back upmarket, after a series of experiments with cheaper vehicles simply diluted brand appeal. Sticker price for the XF remains unconfirmed, but is widely expected to start at around $70,000 in the U.S.—well above the $48,300 starting price of its predecessor, the retro-looking S-type sedan.

At the same time, experts say the design leap should have been even bolder and more distinctive. "Although it brings Jaguar two design generations forward, it is still one half-step behind the competition," says Sam Livingstone, a London-based auto-design strategy consultant and director of the industry paper Car Design News. Livingstone described the XF design as less technologically advanced than Audi, BMW (BMWG), or Mercedes (DAI).