Crying Fowl

While we await events or at least someone to quack the story, we speculate upon the probabilities surrounding a possible PSA / JLR marriage. 

(c) Coventry Live

There is a commonly quoted saying which states that if something looks like a duck, walks like a duck and quacks like a duck, there is a strong probability that it is in fact an amphibious biped. Apply this reasoning to the speculation currently swirling around Jaguar Land Rover’s Warwickshire headquarters, and to the untrained eye it does appear that its Gerry McGovern designed outdoor water feature must be teeming with waterfowl.

A number of years ago, while on a factory visit to a JLR plant, Ratan Tata, when asked by an employee how long the Tata founder envisaged retaining the JLR business, he allegedly replied unequivocally, “Forever!” Of course events can make the most fervent declarations moot, so we ought not blame Mr. Tata for making what may prove to have been a rash pronouncement – undoubtedly he meant it at the time.

Meanwhile however, the unconfirmed reports of a putative partial or full sell-off to Groupe PSA continue to waddle and quack like a pond full of Mallard. Officially, all we have had are denials; from Tata, who have restated their commitment to the JLR business, from PSA’s Carlos Tavares, who has expressed vague interest, but little more and from JLR’s Ralph Speth, who states that he has met with Tavares, but didn’t discuss ownership.

But to return to the duck pond, we know that JLR’s recent commercial woes (in particular its China Crisis) taken in conjunction with a parent with troubles of its own (not least a set of restive shareholders), probably means that there is truth in the rumours, insofar as talks taking place. What they will result in however, is another matter entirely. But assuming Tata do wish to offload, what could a merger or takeover by PSA mean for either party?

On the face of things there doesn’t appear to be all that much in it for PSA, given that they operate in a very different sector of the market, meaning that there would be little parts commonality in terms of powertrains or platforms which could be employed to share costs. Furthermore, a merger would further expose the PSA business to a UK which remains poised on a knife-edge over a chaotic and damaging exit from the EU, with all that could imply.

Further still, in addition to the headache of managing (or shutting) Vauxhall’s underutilised UK plants, PSA would also find themselves post-takeover having to take painful and expensive decisions on those of JLR, several of which are operating well short of capacity, owing to lack of demand for the vehicles built there. Of course, similar arguments were propounded prior to PSA acquiring the GME businesses in 2017, so it’s possible that Mr. Tavares sees possibilities others have missed.

However, what JLR does offer PSA is a pre-existing and experienced distribution, dealer and parts network across the United States, a market which Tavares has vowed to enter with the Peugeot brand in a couple of year’s time. Furthermore, JLR, assuming it can be returned to financial health, could prove a valuable profit centre in a sector of the global market where PSA needs to enter in order to remain a viable player.

Another aspect is the potential for the DS Auto brand. Currently saddled with underwhelming mass-market architectures and powertains, its fortunes could potentially be enhanced (along with its credibility) by an engineering tie-up with JLR.

Meanwhile in Warwickshire, there seems to be little cause for optimism. With scant new product to bolster a dispiriting 2018, Jaguar Land Rover’s fortunes are unlikely to take a significant upward trajectory during 2019. In addition, the carmaker’s restructuring plans are not as yet paying dividends, meaning the business remains vulnerable to further headwinds. What is evident is that CEO, Dr. Ralph Speth, while obviously in possession of considerable qualities, has presided over what can only now be termed as a failed growth strategy.

Certainly, should a merger/takeover with PSA take place, his position is likely to be under threat. But what could Tavares bring, aside from financial nous and a (arguably) larger safety net? What is clear is that any PSA takeover would see a similar stringent cost drive take place to the one lately enacted at Opel/Vauxhall.

What this could mean in terms of jobs and/ or factory closures is obviously a matter of speculation, but it would certainly be likely to entail a curtailment of unprofitable model lines – bad news for brand Jaguar, given their current commercial situation. But while Jaguar remains a car brand with significant potential, the current JLR management have failed to execute it in anything like a convincing manner. It’s been said that Carlos Tavares is a product-led CEO, which suggests he would be unlikely to simply slash and burn. However, while it has been clear for some considerable time that the limping cat requires vision, so too does the Land Rover side of the coin.

For whoever gains control of JLR, (notwithstanding Tata retaining some or all of the business), there is considerable work to be done to ‘future-proof’ the carmaker, with perhaps the biggest and most urgent being that of perceived quality. JLR currently languish close to the bottom of most reliability surveys and whether or not this is an accurate reading of affairs, it’s clear that this is a perception which has become stubbornly embedded. There also remains perplexing issues around product overlap, which suggests a lack of clear-sighted product strategy.

Of course, none of this may come to pass. Ratan Tata may decide to hold to his promise and retain the JLR business. However, the current dripfeed of speculation and insider leakage suggests a similar situation to the one some twelve years ago when Ford, despite repeated denials were in fact negotiating with Tata over the sale of the JLR business. And one thing we know all too well when it comes to Jaguar at least, is that history has an awkward habit of repeating.

So at the risk of further labouring the waterfowl analogy, all of the reasoned signs appear to point towards the abductive.

Author: Eóin Doyle

Founding Editor. Content Provider.

13 thoughts on “Crying Fowl”

  1. Hi Eoin,

    I hope PSA’s takeover never happens. The F-type will end up with 3 cylinders and anemic diesel engines. Joking aside, it does look likely to happen, usually when those rumours start….

    PSA also suffers from a poor reputation in terms of build quality etc…. so what happens when you combine 2 groups with that reputation ? A mega-group with a mega poor build quality reputation that’s what. JLR’s business and dealerships in North America could certainly help PSA be less eurocentric but I think the purchase of JLR could spell the end of the DS brand seeing as PSA would then have enough brands to cover the higher-end of the market without being saddled with the failure that is DS at present.

    1. I heard Renault was in talks too at some point. I think Renault needs to shack up with or buy another group ASAP as the union to Nissan is turning very sour and might end up with the French fiancée being dumped before it even reached the altar . Nissan has shown it is keen to break up the relationship and to start using the automotive Tinder equivalent and sleep around a little.

  2. At one point (perhaps around the time that Saab disappeared), I think the magazines hinted that PSA could be another casualty. Yet here we are, with PSA having bought GME and seen as a credible buyer of JLR! If not PSA, then what other companies might be interested in JLR?

    Unrelated, but this week Honda confirmed that it is shutting the Swindon plant – though there probably wasn’t much doubt when they made the initial announcement.

  3. Jaguar is currently the bigger problem for JLR, but I think Land Rover is also heading for trouble, with too many overlapping and poorly defined and distinguished models. The Discovery has lost its handsome four-square design and looks too similar to the Discovery Sport, itself rather too similar to the Evoque. Where will the Velar sit when the promised “Road Rover” is launched? It’s already too similar to the Range Rover Sport and any talk of if being more road-biased than the RR Sport is nonsense, given that neither will ever be taken off road. Hence, JLR will have, to all intents and purposes, three vehicles in direct competition with each other, which is crazy for a company with a limited product range and akready stretched development resources

    Land Rover seems to be increasingly a one-trick pony. Even the new Defender looks likely to be more of a lifestyle vehicle than a serious workhorse. At some point, buyers will tire of their big and cumbersome SUVs and JLR really will be in a hole.

    I take no pleasure in making these observations. Thousands of UK manufacturing jobs depend directly or indirectly on the viability of JLR. Maybe PSA could make some sense of it all? Unlike the GME takeover, where the range overlap is huge, JLR would give PSA both a genuine premium and authentic 4×4 brand to extend the company’s reach upwards. It would also provide an excuse to kill the ridiculous DS venture.

    1. If Renault can’t get the opportunity to acquire JLR, who else could they try to snatch ? If they stay on their own, without Nissan, they will be very weak and prone to be acquired by someone else themselves. Having Nissan by their side gave them wings but without the Japanese brand I think it’ll be difficult to survive as it is.

      Granted, Dacia is a success and margins aren’t bad on them but it’s still weak for a major player, they’d need Asian and North American coverage. They already have Lada, which sounds good for the huge Russian market (when it’s healthy) but Iam not even sure if Russians will fall in droves for more modern Ladas seeing as brands, logos and badges seem to play a big part in that market.

      If they hold on to Mitsubishi at least it will give a leg up in the huge South East Asian market.
      If they would somehow succeed in acquiring FCA at least this would be an international player with prestige brands attached.

  4. Makes sense. Or, at least it offers the possibility that JLR won’t collapse in the next recession.

    Luxury vehicle sales fall proportionally far more in a recession. A luxury-only vehicle company needs to be part of a larger volume brand company to survive.

  5. Unreal ! Geoffrey Robinson was a Cold War Communist spy !

    Explains a lot about 70’s era Leyland and Jaguar !

    Seems to have been primarily a financial recruitment, and once compromised he couldn’t stop. You know it’s Labour when it’s a money scandal. (with the Conservatives, it’s always a sex scandal).

    https://www.dailymail.co.uk/news/article-7045141/Labour-MP-spy-Czechs-Party-grandee-issues-denial-archives-claim-passed-intelligence.html

    When was this known ? Why was he appointed to Blair Cabinet with this background ? And if he is a Russian spy, why does he support Remain ?

  6. Seen the latest JD Power car dependability survey?

    https://www.carscoops.com/2019/05/peugeot-tops-uk-dependability-study-bmw-finishes-dead-last/

    Peugeot has gone to great lengths to get the quality of the 3008 and 508 right. And it seems to have paid off. So the earlier comment about PSA quality being an issue in a possible tie up is moot. Especially when you find Jaguar and LR’s positions on that list. Haha. So the truth is that PSA can teach JLR a thing or two about quality. Who’d have ever thought that?

    1. Hi 99johann,

      I’ve seen that jdpower survey. Surprising isn’t it ? I would wait and see other surveys from other countries to see if the latest Peugeot cars are really that good. The results of that survey were odd I thought and if I remember correctly the panel of people questioned was very small.

    2. I always have fundamental problems with taking these surveys too serious, particularly when they’re from JD Power.
      There satisfaction index is nonsense as long as they do not check the expectations of the customers they ask (should I buy a Toyota because somebody else whom I do not know and whose expectations most probably are completely different from mine – because otherwise he wouldn’t be satisfied with a Toyota?)
      Asking owners for problems with their cars always includes the indistinctness of not knowing what people classify as a problem.
      In the Seventies there was a customer survey with the result that the car with the least quality problems was Citroen’s 2CV and the one with the highest number of problems the Benz W114/5. Which is everything you need to know about this kind of surveys.

      “Dear Audi owner, are you satisfied with your car?” “No, not at all. There’s a chirping sound under the parcel shelf that’s so annoying that I can barely drive that car!”
      “Dear Peugeot owner, are you satisfied with your car?” “Yes. It’s rattling like a box of old nails and something’s wrong every week. But it was cheap and after all, it’s French, so why should I complain?”

  7. From Wikipedia:

    “To be able to use the J.D. Power logo and to quote the survey results in advertising, companies must pay a licensing fee to J.D. Power”

    How terribly scientific.

  8. JD Power is a survey company that sells services. If you want a survey that finds out that in a given manufacturing week in 2017, your cheap Chevrolet was the most reliable vehicle, JD Power is happy to provide. They were “accused” of that or something similar a few months ago. Chevrolet pulled their ads extolling wonderfulness following complaints.

    The Consumers Reports index from the US I do believe. They question their 640,000 subscribers each year and tally the results, and have done for 60 years. Their test cars they buy at dealers like you and me.

    Got the 2019 annual car magazine right here for 33 brands: Worst to first, typed by me – online is behind paywall.
    33. Fiat
    32. Jaguar
    31. Land Rover
    30. Mitsubishi
    29. Jeep
    28. Alfa Romeo
    27. GMC
    26. Cadillac
    25. Dodge
    24. Chevrolet
    23. Volvo
    22. Chrysler
    21. Nissan
    20. Ford
    19. Tesla
    18. Buick
    17. Mercedes Benz
    16. Acura
    15. MINI
    14. Infiniti
    13. Honda
    12. Kia
    11. VW
    10. Hyundai
    9. Toyota
    8. Lincoln
    7. BMW
    6. Mazda
    5. Lexus
    4. Audi
    3. Porsche
    2. Genesis
    1. Subaru

    This ranking changes each year, and the top dozen usually shuffle around somewhat. Lexus led for years with Porsche cropping up now and then, with Toyota. BMW and Audi have improved a lot in recent years. The bottom ten change around a bit as well. Funny thing is, they all tend to stay in their slots over the years. Honda’s recent drop is due to an engine that dilutes its oil with petrol, their 1.5 turbo, and it’s in Civic, Accord and CR-V.

    The bottom is the usual JLR and FCA tat with a healthy dollop of GM. If you buy a car, rather than lease or are provided a company car, it looks like Japanese are still the way to go. Unless you have lots of cash and buy an Audi or BMW or yeah, I cannot afford one, a Porsche. MB is lower average, note.

    What can JLR do beyond turning out another variation of the same SUV? Learn how to make reliable cars – then their other attributes would really allow them to sell well. Volvo could do with a buck-up as well.

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