Ford prepares to bail out ailing Jaguar

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The Independent Online

Jaguar confirmed yesterday that it expects to receive a fresh capital injection from its parent company Ford after heavy asset write-downs left the British luxury car maker technically bankrupt.

The company refused to comment on the size of the bail-out but it is certain to run into hundreds of millions of pounds. Jaguar slumped to a £601m loss in 2003 after taking a £534m charge to cover depreciation of its assets.

The charge, which was disclosed in regulatory filings lodged late last month, became necessary after Jaguar abandoned its plan to increase sales to 200,000 a year from their present level of 120,000. The move reflects the much lower profits which Jaguar expects to achieve on its investments.

A spokesman said the effect of the charge had been to leave Jaguar with a "negative net worth" of £322m, adding that this meant the company would have been insolvent without the financial backing of Ford.

Jaguar's results for 2004 will not be released for some time but last autumn its chief executive Joe Greenwell told MPs that losses for the year would be in the "hundreds of millions".

In an attempt to stem the losses, Jaguar is closing its Browns Lane factory in Coventry and cutting 1,150 jobs. The car maker also plans to maximise sales of its profitable models, the XJ saloon and the XK, production of which will switch from Browns Lane to the Castle Bromwich plant in Birmingham.

Castle Bromwich currently makes the S-type, sales of which have benefited from the recent introduction of a diesel version. Jaguar's volume car, the X-type, is made in the old Ford factory at Halewood on Merseyside, which will also become the location for production of the new Freelander from Land Rover, another Ford-owned marque.

The latest capital injection follows a £260m infusion a year ago to cover unexpected losses at Jaguar. The company has been hit hard by the weakening of the dollar, which has made its cars much more expensive in North America, its biggest single market.

The spokesman said Jaguar was confident of receiving fresh financing.