Jeremy Warner's Outlook: More blood on the shop floor as Jaguar slims

Baugur/Big Food; Sainsbury old guard
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The Independent Online

They Are expensive, they are notoriously unreliable, the after-sales service is terrible, they are small inside, there's no diesel version and they are not particularly fast. Yet it would be impossible to imagine the Prime Minister being driven around in anything else, or even the Deputy Prime Minister with less than two of them.

They Are expensive, they are notoriously unreliable, the after-sales service is terrible, they are small inside, there's no diesel version and they are not particularly fast. Yet it would be impossible to imagine the Prime Minister being driven around in anything else, or even the Deputy Prime Minister with less than two of them.

There is something uniquely eloquent and quintessentially British about a Jaguar. By rights, the company should have been out competed into oblivion by Mercedes, BMW and other luxury car marques years ago, but it is still there, and it still sells in some quantity, regardless of the quality control problems which famously causes some rich American purchasers to buy two - one for the road and one for the garage.

Despite owning the brand for more than 15 years now, Ford has never really got to grips with the quality problem. Many of Jaguar's production processes belong to a different age. The car is also put together in an extraordinarily inefficient way. For a marque that sells fewer than 125,000 units a year, it is plainly ludicrous to manufacture out of three separate facilities. Bulldozing the Browns Lane plant, near Coventry, has long been at the top of Ford's "to do" list, but with so many other things to sort out in its UK cars business, the company has somehow never got round to it.

Crucially, Browns Lane lacks its own paint shop, which means that all its production has to be shipped down the road to Castle Bromich before it can be finished. As long as the dollar remained strong, this was none the less a problem that could easily be swept under the carpet. Manufactured in sterling but still largely sold in dollars, a lot can be forgiven when the currencies are so obviously misaligned. But with the dollar at 1.80 to the pound, there's a mountain to climb, and with the losses mounting, Ford has finally got round to gripping the problem.

It wasn't all bad news yesterday. More than 300 jobs making Jaguar's famous hand-crafted wood finishings are to be saved at the Browns Lane plant, and 425 jobs are to be shifted to the Castle Bromich site. There was also the announcement of a new all-aluminium sports car and a long-awaited diversification into diesel - the engine of choice in continental Europe - to help sugar the pill.

Workers ought perhaps also to be relieved that Ford didn't go the whole hog and shift production off to the US. This may always have been difficult for a product whose whole cache revolves around being a hand-crafted British car, but plenty of other luxury European cars are now manufactured in the US without apparent damage to their sales.

The wider point to be made about the British car industry is that though Jaguar and other niche players may be struggling, the rest of it has never been in better shape. Britain today produces more motor cars than it did during British Leyland's heyday in the early 1970s. Only, of course, the plants are no longer British owned. The bulk of production comes from the big three Japanese manufacturers - Nissan, Toyota and Honda. BMW has also succeeded beyond anyone's wildest dreams with the new Mini at Cowley. Tellingly, the bits of the industry which are in trouble - Jaguar, Land Rover (also owned by Ford) and Rover - are all remnants of Britain's past as a motor manufacturer. Britain can still succeed in the car industry, but it seems that it has to bring in foreign expertise and capital to do so.

There is no reason why Ford shouldn't eventually succeed with Jaguar, but unless it can run its plants at and beyond full capacity, it has no chance in today's hyper-competitive car market. The loss of all those jobs in Coventry, the spiritual home of Jaguar with a factory history that goes back to wartime aircraft manufacturing, is a sad day for British motoring, but also an unavoidable one.

Baugur/Big Food

Baugur's Icelandic invasion of the British high street continues apace. After Hamleys, Oasis and Goldsmiths, the Reykjavik based retailer now wants to add Big Food Group to its burgeoning portfolio of UK assets. Baugur already owns 22 per cent of Big Food. Last week it sold its 10 per cent stake in the department stores group, House of Fraser, in a move widely interpreted as a restocking of the war chest for a full assault on Big Food. Will 110p a share - or £378m in total - be enough? With impeccable timing, the Icelanders have pitched their offer just as the company is forced to warn of yet another sickening plunge in like-for-like sales.

Big Food is the less than appropriate name given to the combination of Iceland, the high street food retailer, and Booker, the cash and carry operator. Both companies were hawked around from pillar to post when they were independent. Malcolm Walker, Iceland's founder, spent years trying to find someone to buy it. In a previous incarnation, Stuart Rose was equally unsuccessful in finding a buyer for Booker. For lack of anyone else, the two were eventually forced together, and a pretty miserable marriage it has been too.

It's just as well that the present incumbent as chief executive, Bill Grimsey, is a marathon runner, for the job has been hard slog all the way. The structure of food retailing has changed out of all recognition in the past five years. Iceland has struggled to keep its head above water against the incoming tide of the big supermarket groups. Likewise, Booker has found its corner-shop customers being progressively eaten away by the goliaths of the food trade. Not content merely to out compete the corner shops, the supermarkets have in recent years attempted to extend their influence still further by buying them up and substituting their own supply chains for the likes of Booker.

If he could reasonably sell at 110p a share, Mr Grimsey would bite the Icelanders' hand off to accept their money, be done with it and move on. Yet although Big Food Group looks to be in a state of almost terminal decline, it still has more than £5bn of annual sales, and that in itself must be worth something. In the right hands, the company ought to be capable of generating oodles of excess cash. Big Food is allowing Baugur the due diligence it seeks, which suggests the board has little appetite for a fight. A pound and ten pence is a poor price set against the heights these shares have achieved in the past. Shareholders will just have to hope that Baugur's sighting shot will spark an auction. The City judges retailers by their ability to deliver decent levels of like-for-like sales growth. Private equity is interested only in the amount of cash that can be extracted from them. Don't altogether discount the possibility of rival bids.

Sainsbury old guard

What a terrible thing is pride. Having been made to look prize plonkers by agreeing a bonus deal at J Sainsbury that enriched Sir Peter Davis beyond the dreams of avarice even in a year when profits collapsed, Lord Levene and Keith Butler-Wheelhouse were determined that they should fight Sir Peter's entitlement to the bitter end. From their point of view, it looked like the only sensible way of salvaging at least some reputation from the wreckage of this squalid little affair.

But it never made much sense to Sainsbury's. When Sir Peter bulldozed the non-executives into agreeing his bonus and pay package, he had the good sense to make the terms contractually bullet proof. Sainsbury's might have had a lot of fun dragging Sir Peter's name through the mire, but in the end it would have lost. At a time when the company desperately needs to move on and forget the past, it would have been a terrible distraction. Philip Hampton, the new chairman, has managed to lighten Sir Peter's bag of swag just a little. He's also managed to push the last of the old guard into resignation. He'll be pleased enough with the result.

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