Automotive News - March 31, 2008 - (Page 39)

MARCH 31, 2008 • 39 C H A N G I N G O F T H E G U A R D AT J A G U A R A N D L A N D R O V E R Fuel economy fines loom for Tata Harry Stoffer hstoffer@crain.com comment WASHINGTON — Add this to the list of challenges for the new owners of Land Rover and Jaguar: How to deal with U.S. fuel economy regulations. One obvious likelihood: Write checks to the federal government for failing to comply with standards. Before Ford Motor Co. acquired the two luxury brands, they routinely paid CAFE fines. The company avoided those fines because the rest of Ford’s product lineup — which met the federal fuel economy targets — offset the thirstier Jaguars and Land Rovers. But now the problem has resurfaced. Government data indicate that Jaguar’s cars and Land Rover’s light trucks would miss current standards by several miles per gallon. Fines are assessed at the rate of $5.50 per 0.1 mpg by which a standard is missed, multiplied by the sales volume. So even with the modest U.S. sales of Jaguar and Land Rover, the potential exists for annual fines of $10 million or more. And they soon could go a lot higher. The CAFE standard for cars is 27.5 mpg. The light-truck standard is being raised to about 24.0 mpg in 2011. Under a new federal law, both standards are to rise significantly in the 2011-20 model years, reaching a combined industry average of 35 mpg. Last fall, when Congress was considering details of the bill that set the 35-mpg standard, sources said Ford supported a proposal that would have expanded the definition of “low-volume manufacturer.” If the proposal had passed, Jaguar and Land Rover would have been more attractive to potential buyers. The rule change would have eased standards for companies that qualified, sources told Automotive News then. The proposal, backed mainly by Porsche Cars North America Inc., did not become law. Ford would not confirm the lobbying effort. Ron Medford, senior associate administrator of the National Highway Traffic Safety Administration, declined to discuss Jaguar and Land Rover specifically. But Medford did say the law would allow a manufacturer to comply by purchasing fuel economy credits from companies that exceed CAFE standards. Medford’s agency, which manages the CAFE program, is working out details of the credit trading program. A company also could introduce more fuel-efficient models to offset vehicles with poor fuel economy, Medford noted. But India’s Tata Motors Ltd., which is acquiring Land Rover and Jaguar, is not thought to be planning other models for the United States — at least not yet. c Tony Lewin is an Automotive News Europe correspondent. Land Rover in good shape, but challenges remain Tony Lewin Business is booming at Land Rover, and that’s good news for soon-to-be owner Tata. Land Rover’s product range is fresh. Last year it posted its third straight year of record sales, up almost 18 percent to 226,395. Land Rover appears to be solidly profitable, according to what can be gleaned from Ford’s financial statements. Jaguar has not been profitable since Ford bought it in 1989, and in most years its sales have fallen. TATA New owner raises fears — and hopes continued from Page 3 Timeline: Ford’s luxury buying spree 1987: Ford buys luxury sports car maker Aston Martin. 1989: Ford agrees to buy Jaguar for £1.6 billion. 1999: Ford buys Volvo Cars for $6.45 billion and includes it in its new Premier Automotive Group. 2000: Ford buys Land Rover from BMW for £1.8 billion. 2004: Ford ends Jaguar production at the sports car maker’s Browns Lane factory in Coventry, England, to cut costs. 2007: Ford sells Aston Martin for £479 million to an investment group led by Prodrive Chairman David Richards. Ford hires investment bankers to look into sale of Jaguar and Land Rover. It decides to keep Volvo. Automotive News Europe floorplanning and vehicle loans. Ford also will keep supplying engines, body parts and technical assistance to Jaguar and Land Rover for at least five years. The management team also is expected to stay in place. Ford spokesman Tom Hoyt says nothing is likely to change between now and the end of June, when the sale is scheduled to close. So it’s business as usual at Collier Jaguar in Orlando, Fla., says dealer principal Mike Collier. The new XF sedan is being launched, and Collier’s sales staff made initial deliveries of the svelte performance sedan last week. Collier says no one mentioned the sale to Tata or canceled an order. “No one has said a word one way or the other,” he says. “I haven’t heard anything negative. “It’s like anything else. Who owns Bentley? Who owns Rolls-Royce? Who owns Harrods in London? Has anyone questioned the quality of the luxury goods at Harrods?” Collier says he’s unconcerned about Jaguar’s future because Tata has been a good steward for the other brands it has bought. Those brands include Tetley Tea and Corus Steel, the biggest producer of steel in the United Kingdom. “The one thing that Tata has done in the past is they have been loyal to existing management and brand image,” Collier says. Change of heart Ken Gorin, Jaguar’s dealer council chairman, says he’s thrilled that the sale has finally been announced. Although he originally had doubts that Tata would be the best fit for Jaguar, he since has canceled those reservations. “Tata has shown with the luxury hotels it owns that they know how to do it the right way,” says Gorin, owner of The Collection, a group of luxury stores, including Jaguar, in Coral Gables, Fla. “We’re 100 percent behind it as a dealer council. So far, no customers have raised concerns.” Tata Chairman Ratan Tata has promised that Jaguar and Land Rover will stay true to their heritage. Members of the 6,000-strong Jaguar Club of North America have been posting comments on their organization’s message board, at jcna.com/forums. Many posters are wondering what the future holds. Some think the brand is being given another chance. Others think the sale means bad things in the future, such as production of Jaguars in India. In Corte Madera, Calif., Jaguar and Land Rover dealer Tom Price says he has heard some of his customers express concern about the Tata deal. “It’s a 30-second conversation when you explain what it will do for the brands and that the company will still be British,” says Price. New York Land Rover dealer Michael Levitan welcomes news of the sale. “Tata has many things they can bring to the table for us,” he says. Levitan thinks Tata will keep Land Rover production in Britain and preserve the brand’s heritage. Tata has never “shown that they have bought a company and put a stamp on it that is different from the company’s heritage,” he says. As for the impact on the value of Jaguar and Land Rover franchises, broker Sheldon Sandler says it’s too early to tell. “The smoke has to clear before we know which way this is going to work out for the dealers,” says Sandler, a financial adviser and broker at Bel Air Partners in Skillman, N.J. The firm helps auto dealers sell their stores. Meanwhile, Kip, the Florida financial planner, has put on hold plans to replace his XK8 with a new Jag. “My next car was going to be an XK,” he says. “Now I will have to re-evaluate.” c Less traumatic Land Rover’s history has been less traumatic — or at least its traumas have not been so ruthlessly aired in public. Jaguar made the mistake of announcing to the world that it planned to boost sales to 200,000 by 2001 from 50,220 in 1998. When its expensive diversification into smaller cars failed, the company was damaged financially and publicly humiliated. Land Rover’s approach to growth has been steadier and more gradual. It has skillfully added models to extend the reach of the brand and create niches. The Freelander and the racy Range Rover Sport are good examples. Sales climbed, and so did the reputation of the brand. Luckily for Land Rover, its brand image has been strong enough to overcome its consistently disappointing quality scores in surveys by J.D. Power and Associates. It must remain a high priority of Land Rover under its new owners to keep improving quality to boost its position toward the top in J.D. Power’s rankings. Future could be bright for Jag, Land Rover John Revill autonews@crain.com Jaguar and Land Rover could have a bright future under Tata Motors’ ownership, industry insiders say. This month, Tata Group Chairman Ratan Tata told Automotive News Europe that he would not transfer Jaguar and Land Rover production or component sourcing from England to low-cost countries. “Our plan would be to retain the image, the touch and the feel of Jaguar and Land Rover. We will not tinker with the brands in any way,” Tata said at the Geneva auto show. “They are special global brands, and whoever acquires them has a responsibility to nurture them and enable them to prosper.” Suppliers, trade union leaders and automotive experts say Tata’s ownership will end uncertainty about the future of the two brands and allow them to grow. “ They are special global brands, and whoever acquires them has a responsibility to nurture them and enable them to prosper. RATAN TATA “There is an excellent future ahead for Jaguar and Land Rover. They couldn’t have asked for a better new owner,” said Kumar Bhattacharyya, head of the Warwick Manufacturing Group in central England, which has worked with Tata. Bhattacharyya said Tata’s commitment to long-term investments and keeping the current management teams is positive. “Tata is a very benevolent company,” he said. “They are not going to be looking for a quick buck. They are going to be there for the long haul.” Tata will support Jaguar and Land Rover by providing whatever technology and funds are needed, Bhattacharyya said. Suppliers also are upbeat about the brands’ new owners. “We are very positive, especially when you look at the other companies that Tata has bought, such as Corus and Tetley. Both have gone from strength to strength,” said Grant Adams, managing director of ” Sertec Group Holdi http://jcna.com/forums

Table of Contents Feed for the Digital Edition of Automotive News - March 31, 2008

Axle strike leads GM to alter production plan Industry expert Ferron joins Automotive News Group Hummer adds E85 models Lear expands in China Ford spills the beans on car seats Concern ... confidence ... curiosity — welcome to America, Tata Expect most Ford-bred executives to stay put Tip for Tata: Let British brands be British brands Dana CEO sees need for growth in Asia Chrysler: Any deal for partner would be done by Cerberus Farley retools Flex marketing strategy Malibu attracts import-minded buyers European purchasing execs to suppliers: Costs must fall Reynolds removes dealership modems New Saturn ads will promote Aura, Vue, Outlook This Spring Hill launch is a fraction of the first one GM works on small global car Hal Riney, Saturn campaign creator, dies Dealer sours on China importer Secret computer lets Nissan planner peek into future XM-Sirius merger: Lower prices, more choices? Key Chrysler product developer resigns Ford's new boss in HR plans no major changes Wagener to replace Pfeiffer as Mercedes design chief It's time to break the glass ceiling Autos don't cause all global warming Toyota plumbed the depths of Scion Customer loyalty is serious business Future bright for Tata brands Dauch sends wrong signals as Axle strike drags Yanase opened Japan to Western cars Fewer dealers, sure, but more brands What if Ahn falls short? Want to inspire Lori Queen? Just say no Hanwha to build GM Powertrain assembly line Toyota enters untapped Korea, home of Hyundai James O'Rourke Jr. Picture This -- March 31st, 2008 Lexus pays dealers for innovations Suppliers to the 2009 Dodge Journey Ricardo center has battery focus Howa USA opens interior parts plant in Kentucky N.Y. show suggests a future of smart powertrains, muscle BMW sees new models as sales saviors Ford contract has unique take on core jobs 6 more PACE-setters in auto innovation Buy-here, pay-here may grow Dealers Mercedes SL: A fresh face — with 1 flaw Ex-Chrysler design chief John Herlitz dead at 65 Future could be bright for Jag, Land Rover Land Rover in good shape, but challenges remain Fuel economy fines loom for Tata As segment shrinks, Chrysler minivan output takes a big dip Mercedes names 27 AMG dealers Continental to cut jobs Cobalt SS price: $22,995 Kia opens Ga. training center Nissan idles Mexico plant Plastech legal bill: $1 million for a month Magna will add 3 plants in Mexico El Camino diehards say Pontiac G8 should have been a Chevy No 2nd chance for Nasser, other Ford alums Buick grabs a name from the past After short list, a short stay for Laymon Lori Queen or Ellery Queen? Daimler's mum on BMW Southern supplier strategy Tracing the Camaro's bloodline Alfa searches for a U.S. factory

Automotive News - March 31, 2008

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