Tata Group's purchase of Jaguar Land Rover is set to complete before the end of June. Can it succeed where past owners failed and what are the implications for one of Merseyside's most important economic engines?

The 45-year history of car production at Halewood, in the borough of Knowsley, is littered with crises. The first Ford Anglia rolled off its production lines in 1963 to great jubilation but, through the 1970s and 80s, the plant was better known for exporting revolution than cars as it became an epicentre of union activity and strikes.

Arguably its greatest test todate, however, came in 1997 when Ford decided that the replacement for the Escort, the Focus, would not be produced at the plant, and laid off 1,000 staff. For several years the facility’s future hung in the balance but, in 2001, Ford – which had owned the Jaguar marque since 1989 – invested £300 million in a new plant in Halewood to manufacture the X-Type “Baby Jag”.

Shortly thereafter the parent company decided to base all its Land Rover Freelander production at the site, and the future began looking rosy for the plant that Ford has acknowledged to be its best in the world.

But it was also uniquely vulnerable. When Ford, struggling in particular to make money out of luxury brand Jaguar, decided to sell it off along with Land Rover there was a possibility that it might have done so separately, threatening the future of the only facility to produce both brands.

Fortunately, the successful US$2.3bn bid (effectively reduced to $1.7bn by a £600 million payment by Ford into the Jaguar Land Rover pension scheme) by India-based Tata group does include both the profitable Land Rover and loss-making Jaguar businesses. Tata has committed to maintain the brands’ current UK facilities until 2011, when Ford’s
existing five-year plan for the business expires and, although it has not made any guarantees regarding workforce numbers, unions appear content.

Graham Morgan, Labour councillor and cabinet member for regeneration at Knowsley Council, also seems confident about the long-term future. He tells EN, “The workforce there is first-class. The training that they’ve gone through: it’s a quality workforce. My feeling is that they’ll just prove to the new owners how efficient they are and it’ll go beyond 2011.

“Everybody that I’ve spoken to that’s connected to Jaguar is more than pleased that they’ve been taken over.”

The deal has, in fact, been broadly welcomed by public sector agencies and unions alike, although the largest of the latter, Unite, has expressed concerns that Ford’s decision not to retain a minority stake in the business could leave Ford-owned suppliers, such as the Halewood-based Getrag transmissions plant that employs 700 people and supplies gearboxes to both marques, vulnerable post-2011.

Once more, though, Cllr Morgan is upbeat: “Again, it’s an excellent facility there with a very good workforce. So I don’t see why there should be any problem with it.”

So, what exactly is at stake? Halewood employs 2,400 people directly, making it a shade larger, in staffing terms, than nearby Vauxhall. In fact, of the North West’s automotive sector, only Crewebased Bentley has more employees (constituting the latter’s entire manufacturing staff).

A spokesperson for the Halewood plant told EN the company could not divulge financial figures. What we do know is that it produces around 100,000 units a year (the plant actually has capacity to produce twice this figure, on a three-shift rotation).

That’s more than a third of the 286,000 cars sold by Jaguar Land Rover in 2007. Estimates for the two brands’ combined turnover are in the region of $14bn so, while the Halewood-produced models are at the budget end of their ranges, we are clearly not looking at an insignificant operation.

Of course, the economic importance of the plant extends well beyond the factory gates. It will come as little surprise to regular readers to discover that the North West Development Agency has no figures as to the number or volume of businesses either directly or indirectly dependent on the facility.

Nor does the local council, nor – slightly more surprisingly – the plant itself. In terms of direct suppliers, the main local one is Getrag. While the North West is home to more than 200 automotive companies, research by industry body the North West Automotive Alliance shows that independent component manufacturers in the region do not tend to supply local manufacturing plants: global companies have global purchasing policies.

That said, a transmission system is not a light item, nor a small one, nor a simple one to get  right: all facts that will work in Getrag’s favour if and when the new owner looks to review its supply chain post-2011. Jaguar Land Rover does source 70 per cent of all its components from UK suppliers, though – and it would be a surprise if Tata, no matter how “hands-off” it is (as it has been with its other UK purchases, steelmaker Corus and Tetley Tea), does not at least review this position.

So much for the supply chain – if the facility were no longer to exist in the future, the fate of component manufacturers would become academic. On the one hand, you don’t have to travel far down the M6 to see an example of production lines being stripped out and reassembled half-way around the world where labour is so much cheaper. And of course, no matter how efficient it may be, the future of the Halewood plant simply is not in its own hands.

Cost-cutting looks like an obvious way to turn around the fortunes of Jaguar, which made losses estimated at more than £362 million in 2006. Obvious, at any rate, if you’re studying for a GCSE in business studies and your ambitions don’t stretch further than the requisite “C” grade to secure a job at your local takeaway.

While Jaguar struggles, Land Rover is understood to be a runaway success. Land Rover posted an 18 per cent worldwide sales gain last year, selling 226,395 vehicles. Jaguar meanwhile slid 19 percent to 60,485.

Various factors have come into play, including the tumbling US dollar and environmental taxes in Western countries. Nonetheless, if gas-guzzling, premium priced 4x4s are selling and luxury saloons with a fraction of the fuel consumption are not, it becomes clear that something more than economics is at play.

In the final analysis, the X Type, whose US sales have fallen from 30,000 to 7,000, has just not proved very popular. Worst of all, a car derided at home as being “Americanised” has failed to appeal to Americans.

One thing that Tata has in its favour here, though, is that – unlike Ford – it hasn’t just posted a $15bn loss. The company has shown itself to have deep pockets and be willing to dip into them. Industry commentators agree that the answer to Jaguar’s woes is not to tighten margins but to focus on R&D and make it a truly aspirational brand more: a step up not from a Mondeo but a BMW.

The other thing Jaguar has going for it is its image as an icon of British design. You can’t imagine Dianna Rigg racing through the Alps with the top down in an E-Type constructed in Mumbai. But then you can’t imagine a lot of what has happened to the brand since it ruled the world in the 1960s, so let’s not speak too soon.

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