Ford pays $3.1bn to bail out Jaguar

Ford has injected a further £1.2bn (NZ$3.1bn) into Jaguar in order to keep the loss-making luxury car maker afloat, it emerged yesterday.

The payment means that the US car maker has pumped well over £4bn into Jaguar since it bought the company in 1989 for £1.6bn, not including the losses it has had to shoulder over the past 16 years.

The money, in the form of preference shares, will be used to recapitalise Jaguar and demonstrates Ford's continued commitment to its troubled British subsidiary.

Part of the cash is likely to be used to reduce the £350m deficit in Jaguar's pension fund.

Jaguar made a pre-tax loss of £429.3m last year, according to accounts filed at Companies House at the end of last week.

In the previous year, it made a loss of £601.1m, although the figure was inflated by one-off impairment charges of £533m.

In 2004, the impairment charge to reflect the reduction in the value of Jaguar's assets was £172.7m.

Turnover for the year was down by nearly £600m or a quarter on 2003.

The latest accounts show that without the capital injection, Jaguar would no longer be a going concern.

As of 31 December 2004, it had negative shareholders' funds of £748.8m.

A spokesman said that the scale of Jaguar's losses in 2004 underlined the need for the drastic action the company took 15 months ago when it announced the end of car production at the Browns Lane plant in Coventry with the loss of 1,150 jobs.

Employment now stands at 8,000 compared with 10,200 in 2003.

Jaguar refused to comment on its trading performance this year, although with sales down and its biggest market, the United States, in turmoil, losses are expected to remain in the hundreds of millions of pounds.

In the third quarter of the year Ford's Premier Automotive Group, of which Jaguar is a part, made a pre-tax loss of £62m (NZ$160m).

Both Jaguar and Land-Rover, Ford's other premium UK brand, made heavy losses which were offset by profits from PAG's star performer, Volvo.

In September, the chairman of Jaguar and Land-Rover, Joe Greenwell, was replaced by a senior Ford of Europe executive.

Jaguar's worldwide sales for the year are likely to dip below 100,000 compared with 118,000 in 2004.

North America still accounts for just under half Jaguar's total output but this year it has had to contend with a weak dollar and a bloodbath in the US premium car market.

In addition, Jaguar has withdrawn from the daily rental market in the US.

Production of the XJS saloon and the XK coupe and convertible ceased at Browns Lane in July and was transferred to Jaguar's Castle Bromwich plant on the outskirts of Birmingham where the S-Type saloon is already made.

The smaller X-Type is produced in the former Ford car plant at Halewood on Merseyside.

Despite the increase in underlying losses and the sharp decline in revenues in 2004, Jaguar's wages bill rose from £740m to more than £1bn and nearly £8m was paid out in executive bonuses - double the £4m paid in 2003.

According to the latest actuarial valuation of Jaguar's pension fund in April 2004, it had assets of £1.065bn, which was sufficient to cover 81 per cent of its liabilities.

The company said that it aimed to eliminate the shortfall over a 10-year period starting next month.

It is not clear how much of the £1.2bn capital injection will be used to reduce the deficit.

- INDEPENDENT