Introduction to Midlands Manufacturing Case Studies
Manufacturing is critical. We know that. We see it in our daily lives.
The real question is how critical. How do we understand this importance more fully, and communicate it more effectively?
Some recent research by the West Midlands Economic Forum commissioned by Birmingham City University suggests that the comparative contribution of manufacturing, taking into account the direct and indirect contribution through the distributed supply chain, rather than amounting to 14% for the West Midlands and 16% for the East Midlands is more likely in the region of 38%- 53% for the Midlands as a whole, and rather than 11% for the UK is in the region of 30%.
Of course these figures need more examination, but it is clear that we need to find better ways to really understand what is happening in the economy rather than relying on SIC and SOC codes which appear to be less suited to providing the insights we need for the connected economy.
The challenge is that manufacturing is not appreciated in terms of the talent we need to recruit or the context we use in discussing it.
Amongst the following case studies it is clear that all the manufacturers spoken with are looking for creative and STEM skills combined – whether they are the larger businesses – Jaguar Land Rover, Rolls-Royce, GKN, amazing start-ups , or the considerable number of middle-sized businesses forming the core of our manufacturing heartland.
For these businesses design and innovation is the bridge between as Will Hutton put it, “the consumer questing for the experiential and the business trying to provide that.” Because we need to remember that consumers these days are not buying because they need products but as Ian Callum has said, ‘because they like them’. And it’s probably a bit more than like – it’s perhaps more that people want products that they think say something about who they are, that are imbued with meaning.
The business community are looking for people who are very specialist in terms of science and technological capability as well as being highly creative. They want ‘thinking-doers’ which means that for educators the old divide between academic and vocational is not so relevant any longer to their competitiveness.
Now we finally have an Industrial Strategy after years of lobbying by the CBI, TUC and EEF, amongst others, this is seen as a ‘good thing’ by business. But it is relentlessly STEM focused. There is one mention of design and within automotive the UK’s excellence in car design is mentioned, but there is no further view on how to develop more of the design talent that has led to new product introductions enabling new market share acquisition – at home and abroad.
Businesses want to see the scope of the Industrial Strategy extended beyond the 11 sectors identified. In fact business wants all manufacturing to be valued. Low value added and high value added. They believe our manufacturing base is now highly productive and as competitive, if not more so, in the Midlands as in Germany and China. The case studies suggest this is the case with companies such as Vax, Amtico, Acme Whistles amongst others adopting strategies that enable them to compete directly against the Chinese in lower priced or lower value added market segments.
Companies are facing many new trends and challenges in globalised markets.
New technologies including digitization enabling rapid product development and growing consumer expectations have fuelled demand for new product introductions which have rapidly accelerated over the past decade. For example, 60% of AGA Rangemaster’s revenues in 2014 are composed of products not introduced before 2011. New products introduced by Jaguar Land Rover have opened up new overseas markets with the Evoque in particular being responsible for huge growth in China as sales there have grown from 431 vehicles in 2003 to over 77,000 cars in 2013. For small specialist education chair producer, Hille, they have seen sales and profits grow over the past six years through highly targeted new product launches each year.
Connectivity is a trend that every sector is having to deal with, demanding a combination of ‘hard and soft’ skills in response to increasing complexity around, for example, the development of user-focused haptics in creating the most attractive interface for consumers, especially in the higher value added consumer markets.
Consumers themselves expect products which they are able to customize increasingly to meet the requirements of their own lifestyles, whilst also enabling them to make public statements about who they think they are and how they see themselves within society.
The focus on developing low carbon sources of energy and products that have lower energy consumption is becoming more pressing, along with the quest for lightweight materials.
With greater proportions of the world’s population living in cities urbanization is a trend businesses are grappling with and the internet has brought challenges around the fragmentation of retail routes to market and the ability to micro specialize and compete in increasingly focused market segments.
What does this mean for academia?
Additional funding is required for research and development by applied universities as the emphasis has more usually been on the traditional research-focussed universities. Mike Wright’s recent 2014 report shows that less than one fifth of all research funding on applied research and this primarily through tax credits and patent assistance.
One industrialist, William McGrath, CEO, AGA Rangemaster made the following suggestion that many others would agree with –
“We need to put some millions into this and then let people get on with it. All the meddling is even worse than short-termism. If you’re not getting results then change the manager. Quite simply there is no alternative to industry and academia working together and doing real projects. Enthusiasm and energy are the key to delivery of results and free thinking is required.”
Fragmentation of academia has been highlighted as an issue, especially by the larger businesses which need to invest efficiently in new developments in places with some scale.
All businesses find it hard to engage with higher education as they do not know what expertise and specialisms there are in general and when they do they often do not know how to access this.
Creating more Centres of Excellence and networking these with Catapults and other facilities with expertise or carrying out relevant research is proposed as a priority.
These two factors taken together are holding back investment by industry into academia and the development of applied projects which may lead to value adding and wealth creation, with particular significance for the places where these clusters of academic and business excellence are located.
For the Midlands with our focus for the Maker economy it is vital that there is a greater focus on bringing together art and science with technology, engineering and entrepreneurial dynamism to enable new business creation and user-focussed developments. This activity should centre around the key wealth creating sectors leveraging value add from materials, process, production and making, marketing and branding, retail and post sale services. Indigenous business across the Midlands have identified these critical sectors as including —
– Transport including Automotive & Aerospace
– Agriculture/Food and drink
For these sectors it is essential that a greater understanding of their strengths and weaknesses is developed alongside key opportunities for growth. Business believes that these supply chains will reveal the locus of true economic functionality within the region, unlike travel to work zones, seen as less critical to economic competitiveness, by determining where critical supply chain gaps exist as well as opportunities for on-shoring estimated within automotive alone to be worth in the region of £3bn.
Ian Callum, Director of Design, Jaguar, has said that one of the challenges facing JLR has been in having insufficient knowledge of and insights into their supply chain. He, like others within automotive and aerospace in particular, have commented on the growing importance of local sourcing for collaborative developments, ensuring quality of inputs and enabling speed of response to market demand.
Finally, businesses believe that greater collaboration could be brought about through universities making clearer the degree of technology readiness of research developments. Alongside this businesses felt that greater focus on impact in assessing applied research would be beneficial in incentivising a greater market focus for academics.
Over the past decade plant closures at Jaguar Brown’s Lane, Rover Longbridge and Peugeot Ryton, amongst others across the UK, including GM at Luton and Ford Dagenham, have augured increasing polarisation in the UK automotive landscape.
Whilst mid-priced car production has disappeared in the West Midlands, the region is host to the largest cluster of premium cars made in the UK, with the average value of exported vehicles more than double that of a decade ago at £20,600 (2004: £10,200) and with automotive having delivered its first trade surplus in 30 years that year according to the SMMT. In fact, July 2014 figures from the SMMT show that the UK car industry’s growth continues to have a beneficial effect on the country’s balance of trade exporting its five millionth car since the beginning of 2010 that month.
This case study assesses whether STEM-led innovation alone will enable this powerful cluster to win out globally reviewing companies including Jaguar Land Rover, GKN, MG SAIC, Morgan, Premier Group, Westfield Sports Cars, and Zytek, in the context of global trends and Midlands’ perspectives.
Auto Companies are either moving to agglomerate or to specialise. In 2007 ten Original Equipment Manufacturers (OEMs) were responsible for 75% of world output, with further consolidation expected, combined with new entrants from China and India. Car production has continued to grow rising to 65,433,287 produced worldwide in 2013, up from 41,968,666 a decade earlier. However, these numbers alone mask the transformation taking place.
Whilst the auto industry has largely recovered from the financial crisis over the past five years, global profit centres have altered dramatically. According to McKinsey profits in 2012 amounted to EUR 54bn, up from EUR 41bn in 2007, with 2020 profits projected at EUR 80bn. Whereas BRIC countries, took a 30% share of profits in 2007, this had doubled by 2012 to EUR 31bn, with more than half of this being made in China – a total of EUR 18bn.(McKinsey, The Road to 2020 and beyond: what’s driving the global automotive industry?)
Europe’s profit story has been the reverse with overcapacity remaining an ongoing challenge. In 2007 Europe recorded profits of EUR 30bn, but by 2012 this had become a loss of EUR1bn. America made a good recovery with profits moving from EUR 7bn in 2007 to EUR 23bn in 2012. In Europe automotive sector employment accounts for roughly 12 million jobs; in the US it stands at over 8 million and in Japan over 5 million.
Emerging BRIC markets and Rest of World are projected to account for two thirds of profit made in 2020. Sales growth is estimated at 3.8%p.a. with 4.4% growth in the premium sector. Premium brands, in particular, will move their focus towards offering more intuitive design and usage features, whilst continuing to enhance safety and infotainment.
McKinsey analysis suggests continued opportunities for growth, identifying four key trends challenging OEMs.
- Complexity and cost pressure –EU environmental legislation is requiring lower CO2 emissions; platform sharing amongst OEMs is increasing as they invest in mega-platforms and various powertrain options without knowing where technologies will settle – including drive by wire, hybrid, electric and hydrogen, with in-car electronics already accounting for up to 50% of the value of a car. (Whilst McKinsey expect electric vehicles to account for around 10% of market share by 2020, JLR is understood to be working towards 50% electric car production within next 5-10 years, with the UK government anticipating the market for traditional petrol or diesel engines will have almost disappeared by 2040 (3) [Driving success – a strategy for growth and sustainability in the UK automotive sector, July 2013])
- Diverging markets are requiring regional responses– in terms of growing regional supply chains and product portfolios, with a move towards greater derivatives serving local markets and requiring more modular approaches. The Chinese after-sales market is projected to grow by 20% p.a moving from EUR 20bn in 2012 to EUR100bn by 2020.
- Digital demands are growing as consumers seek greater connectivity, safety, ease of use and customisation, as well as using digital sources for purchase decisions, including online purchasing, opening up opportunities for greater infomatics, haptics and user interfaces
- Suppliers will add more value in alternative powertrain technologies and new solutions for safety and infotainment.
Whereas in 1960s the USA had 60% global market share, in 2013 US market share had declined to 6.6% global production, even though US volumes had remained relatively stable during this period.
In 2003 China was already producing over 2m vehicles, more than UK output, which stood at 1.65m that year. Chinese auto production overtook the USA in 2006. In 2005 USA made 4.3m vehicles, compared to 3m produced in China but by 2006 the tables had turned with China producing 5.2m cars, with US output that year at 4.4m, having fallen by 6% that year. Since then Chinese auto production has surged ahead so that in 2013 output stood at over 18m cars, compared to US production at 4.34m, Japanese output at 8.2m, Germany at 5.4m. www.oica.net.
Greater demand for customisation is resulting in greater complexity requiring modular production and increasingly sophisticated market research to provide greater insights into customer preferences. With the growing importance of designing finishes appropriate to local markets Renault has set up a design centre in Mumbai and Citroen have done the same in China. Whilst emerging players, such as the Chinese, have invested in design centres in established centres in Europe, such as MG SAIC’s design centre based in Birmingham, Longbridge.
These pressures are seen as leading to growing collaborations between OEMs to enhance platform usage across segments, regions and price points.
Writing in September 2013, Professor David Bailey commented, “The Porche Cayenne SUV,” was based on the same PL17 platform as the VW Touareg and the Audi A7, and was launched over a decade ago, now making up over half of Porche’s sales. It’s no surprise VW has just announced an extension of its SUV platform sharing strategy to include Bentley, with Lamborghini is likely to be next.”(Birmingham Post, September 2013)
Smaller vehicles are also seen as an area of growth – subcompacts, micro-cars and superminis – forecast by McKinsey to grow by 5-6% pa to 2020, especially in urban areas. India has already seen strong growth in the small car market, with Nissan and Micra shifting production there. The Tata Nano, having struggled from its launch as India’s cheapest car at $1,759 and aimed at family-users of motorcycles, is being re-launched. Rajan Tata has said, (news.com.au)”A re-launched Nano with some of the differences that we’re trying to incorporate… has good prospects. We are going to relaunch the car not as the cheapest car” but with a different “image“.
Networked cars, McKinsey predict, will increase by 30% p.a., with around 20% connected to the internet by 2020. Services include internet radio, smart phone capabilities, infotainment, driver assistance apps, tourism information, together with safety features. This requires new relationships with businesses able to build apps tailored to the car and an opportunity to develop digital media revenues.
Google has announced that it will start building its own ‘driverless’ or ‘autonomous car’ rather than modifying the ones already in production. The car will have a stop-go button but no controls, steering wheel or pedals and using a combination of laser and radar sensors along with camera data to drive autonomously. It has been designed to seat two with the front designed to be safer for pedestrians, with a soft foam-like material where a bumper would be, and a more flexible windscreen, intended to help reduce injuries.
McKinsey anticipate the ‘most innovation ripe’ area for enhancing customer loyalty will be in developing ‘innovative retail and post purchase concepts –such as brand experience centres, pop-up shops promoting specific products and online sales’. Apparently half of car buyers say they would buy a car online as longs as they got a test drive opportunity or equivalent experience.
The importance of building local supplier bases and designing enhanced supply chains is seen as increasingly relevant to overall competitiveness and flexibility for OEMs, enabling greater speed of response to spikes in demand and greater opportunity for collaborative development. Developing ‘vertical partnerships’ to cut R&D costs and enable faster implementation of solutions is forecast with OEMs positioning themselves in areas of e-motor design and / or manufacturing, battery packaging and integration as well as electronics and software sources. Around 90% of auto innovations in 2012 featured electronics and software, especially in safety and infotainment.
However, research by Keith Bevis and Mariana Doduorova at the University of Hertfordshire concludes that weaknesses in networks between larger and smaller companies, as well as key institutions, is slowing up the capacity and capability of the sector to embrace open innovation (OI) techniques. They state, “Regions that seek to participate in global technology networks must devote as much attention to expanding education and training, creating institutions to support entrepreneurs and SMEs, and building ties and trust, as to attempting to attract investment. The trust and local knowledge that exist within regions can provide competitive advantage in continuously introducing new products and services in concert with the evolution of technology and customer requirements.” (NETWORKING INNOVATION IN THE EUROPEAN CAR INDUSTRY: DOES THE OPEN INNOVATION MODEL FIT?)
They conclude the OI model may not be applicable to all industry sectors, in particular capital-intensive sectors such as automotive. However, they believe, cyclical adoption of OI models may be plausible in mature industries, for example, existing players, “may adopt OI strategy in the beginning of the technology life cycle to deal with a radical technological discontinuity, e.g. the adoption of electrical vehicles, followed by internalisation of the consecutive innovations as the technology matures, and then by re-externalisation of components as interfaces become standardised.”
The UK automotive sector as a whole generates £55 billion in annual turnover, employing more than 700,000 people, with seven volume car manufacturers; eight major premium and sports car manufacturers and more than 100 specialist brands; and around 2,350 component manufacturers. UK Government and the automotive industry have come together in the last few years to agree a strategy for increasing the proportion of UK-sourced components used in cars built here. This has resulted in a major focus for UKTI and the newly created Automotive Investment Organisation, in terms of encouraging foreign firms to establish a UK presence. Recent major investments in the West Midlands and North West by Jaguar Land Rover (JLR), BMW, Bentley and GM have created a significant corridor of opportunity from Liverpool to Oxford dominated by renowned brands and automotive expertise based in the Midlands. (Marches LEP Growth Strategy)
The BIS Growth Dashboard, below, demonstrates that UK car production has bucked the EU trend since the crisis, rising to 1.6m vehicles, with over 80% exported. From 2003-13 the automotive sector has accounted for an average of 0.7% of UK GVA and 5.8% of UK manufacturing jobs. UK Automotive is more R&D intensive than the EU average, accounting for 14% of all UK manufacturing R&D in 2012. Government and industry are investing £1bn in an Advanced Propulsion Centre competition programme to meet this long-term change in the sector. Four collaborative projects investing over £100m were launched in April 2014. The Automotive Investment Organisation (AIO) in UKTI will run over the next two years to support inward investment.
The previous peak in UK automotive production was reached in 1999 with almost 1.8m cars produced -the highest level since 1972, but there was still a balance of payments deficit. In 2009 production fell by -31% on the previous year to under 1m cars as the financial crisis hit. However, turnover grew 16.8% between 2010 and 2011 with value added growing by 11%. In 2012 1.58m cars were produced, with there was the first trade surplus in 30 years, according to Professor Garel Rhys, due to the increasing value of each car produced. SMMT predicts output will reach 2.2m in 2017 ahead of the previous peak in 1999 as part of a wider European recovery.
Britain is the fourth largest vehicle producer in Europe employing 129,000 people in over 2,700 businesses. Over 80% of output is exported to over 100 countries, generating £30.7bn revenues in 2012 and representing 6.3% of total UK exports, with 46% destined for EU markets. During the last decade the UK has become the second largest premium automotive producer in the world with the shift to upmarket niche production. According to the SMMT, the UK is home to over 30 companies manufacturing cars, vans, trucks, buses and engines and 19 of the world’s top 20 automotive suppliers. Over £6bn has been invested in UK automotive sector in the past two years with plants operating at full capacity 24/7 by Land Rover at Halewood and Nissan in Sunderland.
The UK Midlands is home to a cluster of more than 4,000 businesses collectively known as the UK’s ‘Motorsport Valley’. (Birmingham Post 19 June 2014) In a study, commissioned by the Motorsport Industry Association (MIA), assessing how economically robust the sector had been since the recession, it concluded that this concentration of high-performance engineering firms, located primarily in the Midlands, had emerged relatively unscathed from the recession.
Collectively, the ‘Motorsport Valley’ cluster enjoyed a period of sustained growth from 2009 onwards, so that by 2012, its combined annual sales reaching £9 billion and its constituent companies employed 41,000 people, mostly in the supply of world-class engineering products and motorsport services.
It is estimated that approximately 80 percent of the world’s high-performance engineers live in Motorsport Valley. The extent to which British motor sport attracts a wide range of suppliers, academics, researchers and entrepreneurs, what economists call ‘the multiplier effect’, can be gauged by examining the numbers of people directly employed by Formula One teams.
Larger teams, such as Mercedes and Red Bull, employ between 600-700 people, while teams like Force India and Sauber employ around 300, around twice the number employed at Banbury-based Marussia.
More than 35,000 people, not directly employed by F1 teams, work in support industries and including in R&D. Unlike most other industries, the motorsport sector spends an average of 30 percent of its turnover on research and development, a factor which accounts for the extraordinary success of British-built cars on Formula One tracks around the world.
It is estimated that £3.6 billion of Motorsport Valley’s collective turnover is generated from exports. The innovation inherent in creating a winning car can also be applied elsewhere. For example, McLaren Automotive, which produces luxury road cars, has developed a spin-off, McLaren Applied Technologies (MAT), a business focused on applying F1 expertise to other industries, such as healthcare, but also to other sports including cycling, sailing, canoeing, rowing, bobsleigh and skeleton, with MAT engineers helping to improve equipment and enhancing the way athletes approach their training and racing.
In 2009 the Automotive Council was established as a means of promoting a partnership agenda between the sector and government through a vision for a growing and globally competitive sector making an increased contribution to the economy and employment including a role in developing low and ultra low emission vehicles and supported by a highly skilled workforce and strong supply chain.
The government believes that this ‘once in a lifetime technology change’ offers the UK an opportunity to create tomorrow’s vehicles, increase our market share and create new supply chain companies. It recognises that to do this the UK must increase R&D investment and capitalise on this by securing production in the UK, whilst appreciating that this will also require innovative SMEs alongside securing investment from multinational companies.
The Midlands hosts one of the best automotive design bases in the world with renowned automotive designers such as Ian Callum, RDI, at Jaguar, Gerry McGovern at Land Rover, where the 6000 person JLR product development and 500 strong design teams are focussed on producing 50 new products over the next five years. Other internationally recognised designers include Marek Reichman, Design Director at Aston Martin (50 strong design studio), Martin Uhlarik at MG SAIC, with a 40 strong design team at Longbridge. Young designers making valuable contributions include Matt Humphries, responsible for developing radically innovative designs at Morgan, including the Morgan Aeromax, Eva GT and three wheeler, with important sources of talent emerging from Midlands universities including Warwick and WMG, Coventry, Birmingham, Birmingham City and Aston.
Component companies are clustered around the Midlands with renowned 1st tier supplier brands, including GKN. Whilst the UK has some highly regarded expertise in metal parts – casting, forging, machining and assembly, it lacks a serious concentration of larger suppliers, unlike Germany, dominated by suppliers whose revenues exceed EUR 500m, compared with UK supplier revenues at EUR20- 500m. (PWC) UK engine production totalled 2.5m units in 2011. UK engine plant utilisation is high at over 70% with competitive production costs, the UK, having the second highest productivity in the EU after Germany. According to one insider, JLR sources 60% components from UK suppliers and 50% of that from the West Midlands, supporting at least 190,000 jobs directly and indirectly in the UK supply chain.
SMMT are working towards greater import substitution through the supply chain. About one third of UK automotive components come from UK sources. The Automotive Council has identified that up to a further £3bn could be sourced in the UK and the Automotive Manufacturing Supply Chain Initiative has made £150m available to support gearing up the supply chain. The Automotive Council is developing a Sourcing Road Map and the industry and Auto Council are in the process of discovering sector core competencies.
Opportunities for supply side growth and potential areas for skills challenges in the UK include – R&D, transmission, propulsion and engineering systems, IT, software and connectivity, blended user-focussed design, lightweight materials and composites, process design, applied and industry relevant skills in branding, marketing and market research. However, given the user-focus and opportunities for growth, Design Council research shows companies in the UK are investing far less in user design at around 4% of total investment, compared to 81% in technical aspects of design and 11% promotional design and 4% on corporate identity. (Dr J Moultrie, Cambridge University for Design Council)
Jaguar Land Rover, 2011 – 2014
|Year07||08Ford||08-09 (10 mths)||09-10||10-11||11-12||12-13||13-14||14-15 (H)|
|Nos. cars sold
292k inc AM
|125k(inc Aston Martin)||167,000||232,839||243,621||305,859||374,636||434, 311||240, 372|
|Profit Before Tax £||(375.7m)||51.4m||1,114.9||1.506.7||1.507||2.501|
|NPIs||Jaguar XF launch||Jaguar XJ launch||Range Rover Evoque Jaguar C-X75 concept||Jaguar XFR-S
Range Rover Sport Jaguar F- Type
|Jag XF Sport-brake||Jaguar C-X17 Sports Crossover to launch|
|Total prods||Current Jaguar productsJaguar XF (exec car) & (estate)-Jaguar XJ (luxury car)-Jaguar XK (grand tourer)-Jaguar F-Type
Future Jaguar products
-Jaguar C-X17 Sports Crossover to launch
|Current Land Rover products–Land Rover Defender–Land Rover Freelander (compact SUV)-Land Rover Discovery (mid-size SUV)-Range Rover Evoque (compact SUV)-Range Rover Sport (mid-size SUV)-Range Rover (full-size SUV)Future Land Rover products –Land Rover Discovery Sport (compact SUV)
NOTE: Ford owned Jaguar in ‘90s. Land Rover was part of Rover owned by BMW. BMW sold Land Rover to Ford in 2002. It was kept separate by Ford and run by Bob Dover, the Land Rover MD. Ford united Land Rover and Jaguar and Bob Dover became 1st MD of JLR in 2003. Tata, owner of JLR is quoted on the New York Stock Exchange. Ford accounts to year end, Tata accounts March-April.
In 2008 the British economy was on its knees. In the period following the financial crash the Coalition government would pump over £1.3 trillion into propping up banking and financial services. However at the same time government failed to find a way to provide Jaguar Land Rover with an estimated £175m funding package in loans and loan guarantees which the company needed in light of debt refinancing deadlines.
The SMMT had requested Peter Mandelson, Business Secretary at the time, to let manufacturers access the same funding available to banks through special liquidity arrangements.
Car sales had collapsed, slumping 23% in October 2008 alone. At home UK car production fell from just over 1.5m in 2007 to under 1m in 2009. Sales at Jaguar Land Rover had fallen by -35% in a matter of months. A BIS Committee report, 2011, notes, “The industry experienced a 14% fall in automotive sector output in the year to February 2009, compared to a fall of 5.5% for the manufacturing sector as a whole.” However, in 2008, pundits, including Robert Peston at the BBC, felt that the taxpayer could not simply be a ‘source of cheap finance’ for Tata, the company that had acquired the JLR business for £1.3bn earlier that year.
On the ground at JLR a former senior executive was quoted in the Telegraph as saying, “It was about as tight as it gets at a car company. We were playing for time, doing everything we legitimately could to ease the cashflow, and we had a hard time meeting the payroll.”
Another JLR insider commented on the British government’s risk-averse attitude and general inability to provide meaningful support to the sector in comparison with other governments around the world.
Whilst Mandelson’s team had developed an Automotive Assistance Package (AAP) in January 2009, offering £2.3bn of loan guarantees, including £1.3bn of loans from the European Investment Bank (EIB). This was aimed at investment encouraging “the development of cutting-edge green technologies” and a “low carbon future for the industry“; advancing R&D in UK vehicle manufacturing; and creating and sustaining jobs in the sector, with the terms for accessing the funds judged as prohibitive in comparison with terms being offered elsewhere around the world.
One JLR employee noted, ‘many other countries provided cashflow financing. Peugeot and Renault received strong government support in France, and in Germany the government helped to cover the cost of worker layoffs by sharing the cost of these between the taxpayer and the employers. In the US they developed a $25bn fund, the US Auto Green Loan Programme. This enabled Tesla, for example, to access loan funding for the Model S, which it has paid back following the product launch product. Ford was apparently able to access US Treasury bonds at 0% finance with the US taxpayer taking 50% of the risk’
|Government Support Case Study – Automotive Assistance Programme|
|To secure funding from the Automotive Assistance Programme companies had to turnover more than £25m and outline proposals for an investment of £5m. Only one company, Ford, managed to secure funding from the scheme during its period of operation – running from Jan 2009 to Dec 31 2010 – it was prohibited from operating after that date by EU State Aid rules.According to the Telegraph, 15th December 2009, Jaguar Land Rover pulled out of lengthy talks to take part in the scheme after the Government demanded a say in the business’s strategy, and then JLR’s Indian owner Tata turned down a separate £10m loan for its electric car project because it believed it could secure more attractive financial terms from commercial banks.Conservative MP, Peter Luff, the BIS Select Committee Chairman, said, “When it [The AAP] was announced in January it represented a genuine opportunity to help the automotive industry.”But (by)… December… not a single loan or loan guarantee (had) been made. The scheme seems to have been a wasted opportunity to support this important manufacturing sector during the recession.”However, in 2009 Autocar outlined the government’s lack of clarity around the focus of the scheme – whether it was for cashflow support at a time of crisis, or for longer term growth investment. BIS was quoted as saying, “It is important to understand that the AAP is about long-term investment projects, rather than short-term rescue. We have to work at the pace demanded by the companies and … consider the best interests of the taxpayer.”A BIS Select Committee report, dated 10th February 2011 and compiled by MPs, showed a keen awareness of the difficulties business continued to face in accessing finance whilst applauding the success of the Scrappage Incentive Scheme in assisting the auto industry, having been more influential than imagined in increasing demand and helping to reduce CO2 emissions.The Committee highlighted that whilst it was well-intentioned it had failed to deliver any real benefits. BIS Committee records state, “The Department, (BIS), told us that the AAP had provided a £360 million loan guarantee to Ford Motor Company Ltd, in support of a £450 million loan from the European Investment Bank (EIB) to fund six projects in the UK worth a total of £1.5 billion. The projects included R&D and production investment relating to new generation, environmentally friendlier, vehicle and engine technologies.”“The Department stated that an additional three formal offers of support were made to General Motors Europe, Jaguar Land Rover, and Tata Motors European Technical Centre (TMETC). However, these were not taken up due to the applicants’ success in accessing financial support elsewhere.“Written evidence submitted to our inquiry raised concerns about the operation of the AAP. … The Society of Motor Manufacturers and Traders (SMMT) complained that:
“The application process and subsequent approval procedures were lengthy, complicated and may have impacted negatively on timely support needed.
“In addition to the loan guarantee to Ford, Nissan Motors UK received a direct grant to support the development of electric vehicles at its Sunderland plant. While Nissan initially applied for funding under the AAP, ultimately funding was provided via the Grant for Business Investment scheme.
Nissan was, “ultimately disappointed that the programme failed to meet its original intentions”, and that in the end, the “loan guarantee offer was simply not competitive enough” nor did it reflect business needs.
“Nissan argued that the scheme would have been more effective and provided greater stability to businesses had loan guarantees been based on the life of the project instead of a maximum two-year guarantee. It also criticised the costs of the AAP under which additional fees charged by the Government to cover the risk of default ultimately meant that lending under the AAP was less competitive than normal commercial lending. It concluded by stating that the AAP compared unfavourably to schemes operated in other countries such as France which provided direct government financing in the form of grants rather than loan guarantees.
“The SMMT also noted that the design of the AAP meant that there “was a significant gap” in support for medium-sized companies who were too large to be eligible for funding under the Enterprise Finance Guarantee scheme, but were too small to benefit from the Automotive Assistance Programme. The eligibility criteria and the investment threshold were both subsequently changed but SMMT believed that these were late changes and did not sufficiently address assistance for smaller automotive companies”.
“Of the £2.3 billion available in loan guarantees, Jane Whewell, from the Department confirmed to us [the Committee] that only £378 million had been committed and that there were “no plans for automotive-specific schemes in the future”. Under any assessment this figure represents a very poor return for an intervention which could have levered in significant funds for the automotive industry.”
Alan Volkaerts, Operations Director, Land Rover, speaking to the Guardian (28th July 2014), said, “I felt what it was like to take shifts off and implement pay freezes. At that time, I had 1,000 people in Solihull who were surplus to requirements. It was clear that in Tata we didn’t just have a parent that saw us as a financial entity. They were interested in cars. We couldn’t have survived without them.”
Ford, also haemorrhaging cash and suffering from both global overcapacity,+44% in North America and +23% in Europe, and the body blow dealt by the financial crisis, had lost $14.7bn in 2008 – $6bn in the final quarter alone. It was selling all its overseas non-core assets. JLR, as part of this, had been sold to the family-owned Indian conglomerate and carmaker, Tata. Interestingly Jaguar Land Rover had just turned a corner, making money in the years 2007 and 2008, having lost over $800m in 2006.
It’s been widely claimed the Ford management had failed to focus on the upmarket, authentic premium ethos of the Jaguar, Land Rover and Aston Martin brands, for example through moves such as the introduction of the X-Type Jaguar, built on a Mondeo platform, which according to the Telegraph 07 Jan 2013 was, ‘not well received and axed without a replacement in 2009’, but perhaps it went deeper than that.
The style signature of Ford was robust, practical, accessible, ‘everyman’. Whilst the company had made a decision that cars should be designed separately for the Americas, Europe and Asia, the Ford management was said to be hands-on, failing to deliver a lightness of touch expected by consumers in Europe, still the major market at the time.
Insiders at JLR claim that under Ford it was always a fight for investment amongst competing interests, but that tellingly, from the off, Tata has made it clear, “embrace the idea of creating through design the desire to own.”
Professor David Bailey, Aston University, said, “Ford made mistakes, but towards the end it was finally getting it right. Jaguar was starting to turn a profit but Ford had run out of money and it wanted out. There were some great products in the pipeline, the result of some heavy Ford investment. Someone was going to pick it up cheaply.”
£1.2bn did not seem cheap at the time. Misadventure perhaps.
Two factors have been fundamental to the turnaround that followed: great design resulting in great new product introductions and sales successes in emerging markets resulting in JLR exporting 85% of its output by value and 80% by volume.
One market has stood out in particular. In 2003 JLR sold 431 cars in China. In year ending 2013 China had become the company’s single largest market, representing 20.6% share of sales or 77,075 units, compared to the UK home market at 19.3% sales and 72,270 units.
Was this a story all about a company transformed through STEM? This was certainly part of their story. But by no means the whole piece.
Speaking with Ian Callum, Design Director Jaguar, it’s quite clear that specialist automotive design is a fine blend of design, brand values and ethos, customer experience, functional requirements, engineering, technology, with luxury interiors and finishes. It brings together the tangible in the form of the product with the intangible elements – how it feels and what it means to the customer. It’s a question of interpretation. Interpreting people’s tastes, expectations, desires and ultimately fulfilling not only their aspirations but helping them to make statements about who they are.
“These days people do not buy what they need, they buy what they like. We are now in the privileged position that we are able to buy what we like and design is key to that, but some leaders in industry still see design as simply the styling that is the ‘icing on top of the cake’.”
Gerry McGovern, Land Rover’s Design Director and Chief Creative Officer, says, ‘design is the conduit through which everything about what the brand is and represents, is communicated to the consumer.’ He has spoken about how desirability is embedded within design. For example, if Land Rover designs for an older age group, they keep the interior design simple; if they design for a younger age group, the interior design reflects this group’s desire to control and interact with software provided. The younger generation wants to influence it, whilst older customers want to know it’s there and working.
“Our focus is to put our customers at the very heart of everything we do,” says Ian Callum. “With our appealing British-led design and innovative engineering, we remain committed to exceeding customer experiences in all areas of our business.”
Design needs to meet people’s views of their own individuality as well as delivering a greater experience of the brand. It needs to deliver emotional functionality. This means having far greater insights into customers through innovative market research delivering genuine understanding of individuals or broad sets of needs, rather than generalised assumptions based on a form of postcode lottery.
One of Ian Callum’s former colleagues whilst at Ford, Marek Reichman, Design Director at Aston Martin, speaks about design as providing depth and meaning that inspires by creating something original, authentic and unique. He says that great design is about passionate people, because, “without passionate people you can’t create art as design.”
It is, he has said, about being aware of “all the nuances, the story and the mystique and it is about understanding what is ‘appropriate’. In this sense it is (for Aston Martin) similar to wearing the badge on inside; it is understated and always appropriate. True Luxury is achieved through perfection in both design and engineering and is about knowledge and discernment.”
“It is possible,” says Marek Reichman, “to measure beauty by building on Art and Science and Design. Aston Martin are designed to be architecturally attractive drawing on the golden proportion. We are combining form and function through an aesthetic to create emotional functionality. We build in auditory emotional responses through haptic feedback, for example in the door switch. We still focus on craft skills inherent in our production, for example, through our seamstresses sewing our interiors in Gaydon.”
Founded in 1922 as the Swallow Sidecar Company by motorcycle enthusiasts Sir William Lyons and William Walmsley, the ‘SS Jaguar’ name first appeared in 1935 on a 2.5 litre saloon.
Design has always been at the heart of Jaguar’s DNA, with eye-catching sports cars prompting much attention and capturing the imagination. These included the XK 120 of 1949, later the XK 140 and XK 150, the much loved E-Type classic of 1961, designed by aero-dynamicist, Malcolm Sayer, and exhibited at New York’s MoMA. The sales slogan ‘Grace, Space, Pace’ encapsulated the firm’s design ethos, leading to record sales successes. It is this heritage that creates the ethos, providing the depth and meaning that ensures brand authenticity and inspires pride and passion in current products and into the future.
Government Support for Manufacturing Design
Back in September 2010, it was clear Ian Callum was still smarting from their dealings with government.
“I have a strong sense of aggravation that our government, both at national and local levels, does not appreciate the value of manufacturing in the UK,” he said. “There was an attitude that ‘money begat money’ and money was not made from manufacturing – we had become too sophisticated for that. But it’s only recently that Germany has been overtaken by China in terms of the value of their manufacturing for export, which is huge.
“It is my firm belief that design and manufacture could be the answer to our economic problems given the intellectual and creative capacity represented in that. So why can’t we get back to making things….taking something out of the ground and turning it into something of value as we have done in the potteries, for example, for centuries.”
The feeling that the ‘folk in- London’ don’t get manufacturing persists. As he pointed out, for most of the past decade UK auto production had been quite stable, in and around 1.5m – apart from after the crash in 2009. Since 2010 car production in the West Midlands has steadily increased from around 300k in 2010 to over 500k projected end 2014. What’s more, the value to the economy of manufacturing has exceeded the value of financial services over the past five years in all but one year, 2009, when manufacturing contracted dramatically following the financial crash but financial services received a considerable fillip.
Design is integral to JLR’s operations, being proactively used to add value to the brand, provide more value added for customers and reduce operational costs as well as supporting marketing and sales of products and services.
Dr Ralf Speth, JLR’s chief executive, is focussed on doubling sales volume to 750,000 by 2015. Tata is investing £10bn to launch 40 new models within five years, including the Jaguar XE saloon and a sport version of the Land Rover Discovery.
£500m investment is ongoing into the i54 new engine plant at Wolverhampton, which will start to produce its own engines for the first time later this year. JLR is also investing £1bn into establishing a manufacturing base in China, its biggest market, through joint-venture partner Chery. (Guardian 28th July 2014)
Luxury Car Design
How do we approach auto design and what has driven the renaissance in luxury car design in the UK?
JLR as Britain’s biggest investor in automotive and manufacturing research and development, is spending £2.75 billion in product creation in the 12 months ending March 2014. For Ian Callum it all starts in their Advanced Design Studio. A place blending engineering and design, blue-sky thinking, lateral and creative approaches, “the place where are the rules are broken!”
As Ian Callum said, “Our MPs think automotive manufacturing is old-fashioned and that the Germans, for example, do it so much better than we do. But we have the best design studios in the world.”
“Every business should have an advanced design studio – part design and part engineering – to do the broader thinking about the future direction for products. Too few businesses are doing this. Lots of companies will go outside and get ideas and because they are paying more for consultants they will expect answers quickly. But often quick answers are not the solution – free thought is needed to develop new ideas and this can take time.”
One of the ways the automotive industry tests out new ideas with demanding luxury markets, eagerly anticipating next generation innovations, is by regularly promoting and launching new concept cars.
The CX-75, for example, designed by Ian Callum and his team, taking over two years to develop with engineering, represents one of the most innovative and technologically advanced prototypes ever created. A state-of-the-art all wheel drive hybrid supercar with the efficiency of a low-emissions city car, it is capable of achieving 0-100mph in less than 6 seconds (with advanced 7-speed automated manual transmission)with a top speed of 220mph whilst producing less than 89 G/km CO2 by drawing on F1 inspired engine technology pioneered in association with Williams Advanced Engineering. Adrian Hallmark, Global Brand Director, Jaguar, said in June 2013,, “(Through) the C-X75 programme …arguably the world’s fastest test-bed for the world’s most advanced technologies… Jaguar is looking to shape the cars of tomorrow and …laying the foundations for the next generation of Jaguar innovations.”
C-X75 prototype innovations have included cutting-edge hybrid technologies, carbon composite materials and advanced engineering and design solutions, forming the basis of future research and development, product developments and next-generation engineering for the wider family of Jaguar and Land Rover brands.
Automotive as Fashion
Ian is clear that the car industry was one of the first businesses to realise the need for different designs and ideas to refresh their approach and drive sales demand.
“Automotive recognised early on that it is in fact a fashion business. The car industry is constantly trying to re-invent itself and because lead times are so long we have to think more creatively before we even start making anything.
“In the ‘50s US car companies came out with a new design every year – driven by fashion. Today cars are so much more complex that you can’t do that. We work on a 3-4 year lead time but we are juggling with expectations, tolerances, colours, styles and predicting our customers’ desires in these areas 3-4 years hence.”
One of the features of British style, according to Ian Callum, is a sense of humour. Humour, he says, is essentially a British quality and a national trait. It is part of us and our companies should be fun and not take themselves too seriously.
One of the biggest growth trends for JLR has been in the SUV market, fashionable amongst younger age groups, especially in emerging markets.
Speaking about the Jaguar C-X17 Crossover SUV to Autocar Ian Callum said, “There is a generation of 15-25 year olds that doesn’t care about sports cars or saloons. They aspire to own an SUV – especially in China. ..The tipping point came when we were doing the XF…I’ve always resisted this type of car, but we sent out a research team around the world, and it found this is what the world wants.”
Ian Callum also said, Birmingham Post 19th September, 2013, “I didn’t feel comfortable with the idea, although there were a lot of people within the company who did. The greatest challenge with the SUV was getting the proportions right to ensure it remained faithful to the Jaguar heritage. “This sort of car is the aspirational car of choice for an entire new generation. This is what they want. In fact, in some countries this is all they know….during the development of the F-Type the information came back that their idea of a performance car is one of these.”
The company has benefitted hugely from the growth in this market segment. One insider said, ‘Our two biggest models, the Range Rover Evoque and Range Rover Sport – which didn’t exist some 10-11 years ago – are now responsible for well over 30% of all company sales. The Range Rover Sport came off a Discovery platform – it’s shorter, has less metal, greater styling and branding focus and it sold for a lot more than the Discovery.’
According to Ian a lot of today’s legislation is creating its own aesthetic. For example, boot lids are high because of aero-dynamic demands. Front ends are designed for pedestrian protection. EU environmental legislation is driving platform, materials and engine innovations.
“However” he adds, “function always comes first – then how to clothe it in the taste of the day.”
Radical new technologies driven by EU environmental legislation are being developed in Midlands businesses. If companies don’t cut emissions for fleets by 2015 they will be fined. Professor Bailey, Aston University, asserts that far from opposing this legislation auto companies have been helping to shape it with the EU regulating to innovate through ‘smart regulation’.
Jaguar Land Rover have recently announced a collaborative project, known as the the Evoque_e, to develop a plug-in hybrid and full battery-powered electric car based on the Range Rover Evoque with the potential for high volume production capable of delivering benchmark performance in terms of cost, weight and sustainable use of materials.
“Looking back, some of our previous classic designs couldn’t be made in today’s environment,” says Ian Callum. “The E-Type, for example, is beautiful because it is visually correct. It is clearly a car of the ‘60s. Malcolm Sayer, who came from the aerospace industry, created cars he felt would go through the air effectively. However, it was only later that the impact of the rolling road on the aero dynamics was fully understood, so this was not taken into account at the time. The legals today would prevent a design like this ever coming to market. However I love these design classics and their design integrity.”
One of the trends the sector is grappling with at the moment is the move towards smaller cars. “The world is downsizing, less mass, less weight. Jaguar’s frames are made of aluminium which helps of course – but people want smaller cars as cities are crowded and space is at a premium. My personal view is that Jaguar should do a much smaller car, but this is some way off,” said Ian Callum speaking in 2010.
However, just three years later, in September 2014 JLR launched their Baby Jag, the Jaguar XE, a four door saloon, aimed at competing head on with the BMW 3 and 4 series models, designed, once and for all, consign the X-Type Jag to history and grab serious market share in the executive saloon market currently dominated by BMW, Mercedes and Audi.
Jaguar F-Type Design
The design process for the Jaguar F-TYPE, 2013 World Car Design of the Year, provides an insight into blend of engineering, technical design and production, styling and fashion essential to the successful production of a luxury high performance car.
Jon Sandys, Principal Design Manager, Jaguar, outlines this process step by step.”One feature key to a successful design is a feeling for the brand, its core values and its lineage,” he says.
“The lineage for the F Type was the SS100, XK120 and of course the C, D, and E-Type Jaguars. Theirspirit is still relevant to the cars being designed today. It’s about the ethos of car. The XKSS was driven by Steve McQueen, amongst other celebrities, enjoying a distinguished history.”
“At the start the design team focus on exterior and interior ideas, modelling concepts, and moving into clay modelling.”
Marek Reichman describes this process at Aston Martin, “We create renderings. The car starts to emerge like a sculpture, carved from clay. The clays are covered in a silver foil like material to look as close to a finished vehicle as possible so we can consider and work through the interiors creating the look and feel of the vehicle during this process.”
Whilst it generally takes four five years to put a car into production, in the case of the F-Type it was done in two years through focus, hard work and hand in glove collaboration with the engineering team.
“To create the exterior the design team hold a competition with all the designers, hand-sketching and developing their ideas,” says Jon Sandys. “They move these design ideas forward developing models for nomination– still using pen and paper and traditional sketching techniques – and drawing on current trends and fashion influences.
“The team moves the concepts onto Adobe Photoshop to create these images into something they can adapt. They refine their concepts down to three choices. These are developed into full size clays which are ready to show at the next stage, called ‘Go for One’. Ian Callum, often accompanied by our Chairman, picks out a preferred design.
“A virtual presentation is made in Alias, from which point we move to Maya hardware programming to see how the design looks with different paints, a gloss, with an A-Class surface generated. The design team can spend months, if not years, on surfaces. Cubing verification models are used to evaluate car design and this information goes into developing crafted cars.
“Interior design is developed by creating pen and paper sketches before putting these into Photoshop for ‘dusting’ and moving towards one theme. We create full-sized clays of these so we can sit in the models to get the feel of being in the car. Every component is subjected to the finest analysis – I spent 18 months designing the steering wheel, consistently refining and re-working it. We create a lot of sketches in CAD creating A Class concepts in ICEM Surf and Cubing models,” says Jon Sandys.
So how do companies like JLR avoid the perception commonly held that one team is simply producing the ‘styling’ whilst another is developing the more technical ‘engineering package’.
An engineering designer at JLR, says that whilst both teams ‘can stand off on one another from time to time’, JLR are doing some great things to ensure an integrated approach. ‘One way is to employ a Studio Engineer with either a craft or engineering background. They act as integrators or a bridge between the two teams,’ he says. ‘Usually there are twice weekly meetings between the engineering and design teams and at least one per week for both exterior and interior design teams. Working up the fine detail starts very early. Designers are looking at trends and marketing input, trying to spot the next niche. Design and Development Engineers come together when a project is coming up and technology can be used to assist greater integration. Toyota, for example, take people from production engineering and re-circulate them into R&D in a constant cycle.
‘All designers and engineers drive competitor cars, spend time with customers – over periods of weeks, and as with most businesses, visit trade shows and international fairs. More and more and especially with the greater integration of electronics and software, we are looking to understand emerging customer requirements and to integrate these.’
However others in the business are concerned that the UK is not globally competitive in terms of the innovation environment. Luke Herbert, Head of Government Relations says, ‘We need more globally competitive taxation and support for applied research and whilst we have some good roots we need far greater scale of applications. We’re competing against Mercedes, BMW and so what Birmingham and what the UK does has to be measured up against other global markets and destinations.’
Alongside all the investment taking place under Tata’s ownership has been a newer and fresher approach to people management instilling a culture that is placing pride and passion for the product at the heart of the company ethos.
Philip Robbins, Trade Union Shop Steward, having worked at the plant for 21 years says that Tata has transformed JLR into a ‘British challenger to Germany’s finest’. “We have noticed a big change in management views since Tata came in. There are men who have been here for 15, 20 years or more who have never even sat in the cars because no one on the floor can afford to buy one. That was one of the main gripes.” JLR introduced the Jaguar Alive programme, allowing staff to bring a family member to test drive a car at the weekends. Robbins says, “There’s a lot of emphasis on making people feel comfortable coming to work. They now recognise that if you have a contented workforce, it helps to bring out workers’ passion for what they do.” (Guardian 28th July 2014)
Land Rover Solihull’s workforce today stands at 7,300. Halewood has trebled staff numbers to 4,500 workers in the past two years.
At Solihull a second 50,000sqm aluminium body shop has been opened next to the original, producing more lightweight shells for Land Rover vehicles, such as the Discovery. A third 68,000sqm hall will open later this year making aluminium bodies for Jaguar. It will start production on the Jaguar XE Saloon by end 2014. At 81,000sqm this facility will ‘trim and final’ for Jaguar, ‘marrying’ vehicle carcasses to engines, gearboxes and driveshafts. It will be the first time a Jaguar has rolled off the production line at Solihull, which has traditionally been a Land Rover site. (Guardian 28th July 2014)
In mid August 2015 Jaguar Land Rover announced that it would be locating the hub of its new special operations division at Prologis Park, Ryton, the former site of the Peugeot car plant and close to Jaguar’s historic home in Coventry.
Reporting on this development, Business Desk stated that the Special Vehicle Operations Technical (SVOT) Centre, as the 225,000 sq ft hub would be called, would be a global centre of excellence specialising in the creation of high-end luxury bespoke commissions and extreme performance vehicles. The line up to-date included Project 7 F-Type, unveiled at the Goodwood Festival of Speed, a series of new lightweight Jaguar E-Types and the ‘full fat’ Range Rover Sport SVR – the most powerful ever production Land Rover. Operations are set to start end 2014 with a team of 150 Jaguar Land Rover specialists based at Ryton. The company is recruiting 100 new highly-skilled engineering and technicians, whilst investing £20m in specialist equipment and a customer commissioning suite. The technical centre will also include Formula 1-inspired flexible workshops and a specialist paint studio. This centre is located close to the new Jaguar Heritage workshop at Browns Lane where the new lightweight E-Types are being produced.
John Edwards, SVO managing director, said: “We are excited by the capability and potential that this new facility will give us. We will be creating truly iconic vehicles that reinforce the global reputation of both Jaguar and Land Rover brands as we expand our product portfolio and fulfil our ambitious plans.”
The first vehicle to roll out of the new SVO workshop will be the Project 7, which is the most powerful and fastest production Jaguar to date. This is an exclusive product, with just 250 models being made available worldwide. Each F-Type Project 7 will start life at the company’s plant in Castle Bromwich, before transferring to the SVO technical centre to complete the build by hand.
‘We don’t own our dealerships,’ explains one JLR employee. ‘Neither here nor in China where we have seen such huge expansion in our footprint over the past 3-5 years. There has been tremendous investment and innovation amongst the Chinese dealerships and a phenomenal focus on quality as part of the premium experience associated with the Jaguar Land Rover brand. They have invested in new technologies, lounge waiting areas and text message updates during services, explaining what is happening and when vehicles will be ready for collection.’
Completing the Range
In September 2013 Jaguar Land Rover announced £1.5bn investment into new technology to develop the innovative aluminium chassis for future models. Writing about this Prf David Bailey said, “what was critical about …JLR’s announcement was that effectively it was a statement of intent. A range of new all-aluminium models will spearhead a major expansion of the Jaguar brand and contribute towards JLRs growth over the next few years. (Birmingham Post business blog September 2013)
Dr Ralf Speth, CEO, JLR said “At Jaguar Land Rover we place the customer at the heart of everything we do and the introduction of a world class all new aluminium vehicle architecture means we will be more competitive, flexible and efficient delivering exciting new products for our customers around the world.”
As JLRs response to the ‘modular challenge it has been about producing a brand new scalable aluminium architecture – known at JLR as iQ[Al] – designed to underpin a range of models from 2015 starting with the medium sized sport sedan, or a baby Jag to go head to head with the BMW’s best-selling 3 series.
This model will take advantage of the first in the range of new fuel-efficient four-cylinder turbo charged petrol and diesel engines to be produced at the new i54 engine plant in Wolverhampton.
Professor Bailey notes, “A Jaguar ‘Sports Crossover’ SUV …will start to fill some of the gaps in the Jaguar range which have been holding back sales.”
Jaguar’s present range offers two sports cars (XK and F-Type) and two executive saloons (XJ and XF saloons) in slower growth segments with the SF Sportsbrake offering an estate Jaguar for the first time since the discontinued X-Type. “But,” says Professor Bailey, “There are still glaring gaps in the Jaguar line up; notably in the form of an entry-level saloon to fight the BMW 3 series and Merc C Class, and a crossover Jag that uses Range Rover’s advanced 4-wheel drive technology. With the SUV market in China set to treble by 2020 the C-X17 is a vital part of the plan for Jaguar.
With over 80% of JLRs sales coming from the Land Rover and Range Rover brands the Jaguar brand needs to grow and play a much bigger role in helping JLR continue to grow.
With Jaguar selling 77,000 cars in 2013 and with every car making a loss, according to Phil Popham, Group Marketing Director, JLR, (Sunday Times 8th September 2013), the new Jaguar XE has been launched to take JLR volumes to the targeted 1m levels required to drive new product development and put Jaguar back in the black, being launched at an all star West End-style musical on a specially built stage in Earls Court, costing £4m and with 3,000 VIPs, dealers and journalists. Prices start at £27k and Jaguar are increasing the dealerships from 2,000 to 3,000 to sell the car with 250 dealerships in China alone, already the company’s second biggest market.
As Dr Ralf Speth launched the 3 Series BMW, the benchmark car in this market segment, his experience has been brought to bear through this development process.
The XE will be made in the new £1.5bn factory in Solihull where 1,700 jobs will be created. The engines are built in a new £500m plant in Wolverhampton creating 1,400 jobs.
The car will be launched with four and six cylinder diesel and petrol engines, with three and six cylinder models to follow and with estate, four-seat convertible, coupe, all-wheel drive and hybrid models planned. It includes 4G wifi for multiple devices, with android and apple sync with the in-car computer enabling app use. According to the Sunday Times the car has the ‘first pin sharp laser head-up display – navigation instructions and information that float in the driver’s eye line, removing the need to take your eyes off the road.’ Phil Popham says, “Our entry level cars do 75mpg and emit 99 grams of carbon dioxide per km. That’s significantly better than all our rivals. The basic cars are so green they are exempt from UK road tax….Because the car is made of aluminium it is the lightest in its class. It is also the most aerodynamic Jaguar ever. That means even the four cylinder diesel can reach 140mph.”
This model is intended to take on BWM, Audi and Mercedes. With Helmut Becker, Head of the Munich-based think tank IWK saying that the key to its success is being ‘un-German’ with Popham agreeing that its Britishness really gives the car the edge. “there are some great cars on the market, but Jaguars have more personality. We have more style, more eccentricity, more humour, more wit, more whimsy. We appeal to the head but we also have heart and soul. Our cars have a visceral, emotional connection with the driver.”
Commenting on the success of the small Land Rover, the Evoque, currently selling 125k per annum, he says, “The Evoque proves that if you go small, it does not mean you dilute the DNA of your brand. Evoque is a small but premium luxury car for which people are willing to pay a luxury price. With the XE we’ve got a new smaller car that looks great, drives great and is going to be fabulous. Everything is set up for this car to be phenomenally successful.”
The car industry has been consolidating and specialising. In 2007 ten Original Equipment Manufacturers (OEMs) accounted for 75% of world output. West Midlands’ producers have moved out of mid-priced car production, specialising in high value brand-led vehicles, representing the largest cluster of premium cars made in the UK, with regional output at around 500k cars in 2013. Worldwide in 2013 65m cars were produced, up from 42m a decade earlier.
Auto sales and profits are increasingly being generated by BRIC countries, accounting for 57% of the EUR 54bn profits generated worldwide in 2012, with China alone accounting for 30% of the total. BRICs and Rest of World are due to account for 75% of profits generated by 2020 with McKinsey analysis highlighting four key trends – increased technological complexity leading to platform-sharing, divergent markets and customisation, requiring regional responses and greater customer insight; growing digital demands and connectivity (growth predicted at 30% pa); enhanced supplier value add with opportunities for greater on-shoring. Auto sales growth is predicted at 3.8% pa with 4.4% growth in the premium sector, due to focus increasingly on intuitive design, haptics and usage features, with growing attention on safety and infotainment. Smaller cars are due to grow at a predicted 5-6% pa to 2020.
The Jaguar Land Rover story is essentially one of experience and belief overcoming theory. In 2008 JLR had been sold by Ford for £1.2bn to Tata, a privately-owned Indian conglomerate and car-maker, headed up by Rattan Tata – an architect with a passion for design. During Tata’s first ten months of ownership JLR produced 167k cars. By 2013 the company had produced 434k cars that year, exporting 80%, employing 26,000 people and delivering £19.4bn revenues and £2.5bn profits. Two products, Land Rover’s Range Rover and the Evoque, accounted for 30% of sales alone, with 80% of sales attributed to Range Rover and Land Rover brands and the lion’s share of company profits.
After the 2008 financial crash whilst the government was ostensibly prepared to offer help during this crisis period, it was done in such a way as to be rendered meaningless. The Automotive Assistance Programme, developed by then Secretary of State, Peter Mandelson and his team, set aside a total of £2.3bn funds to support the automotive sector in their hour of need. Only one company, Ford, was named as successfully accessing the funding, having been allocated a loan guarantee to support development of new generation environmentally-friendly vehicle and engine technology, rather than as support for crisis relief activity. The BIS Select Committee appointed to review support provided to the sector concluded in 2012, “Under any assessment £378m (the final funds allocated) represents a very poor return for an intervention which could have levered significant funds for the automotive industry.”
But is the JLR turnaround story all about a STEM-led and inspired revival? Whilst that was certainly a vital part of the story, it was by no means the full story.
Ian Callum, Director of Design, Jaguar and Gerry McGovern, Design Director and Chief Creative Officer for Land Rover both agree that design – or how the user perceives and feels about the product they purchase and use – is equally essential. Ian Callum says, “people these days do not buy what they need they buy what they like.” Gerry McGovern speaks about design being the conduit through which everything about the brand is communicated to the consumer. Marek Reichman, a former colleague of Ian Callum’s whilst working at Ford, talks about design providing depth and meaning by creating something original, authentic and unique. “We are combining form and function through an aesthetic to create emotional functionality”, building emotional responses through haptic feedback. Luxury, he says, is achieved through perfection in design and engineering by being aware of the nuances, the story and the mystique and by understanding what is ‘appropriate’.
JLR , like others in automotive, is able to test out new concepts amongst their global customer base and audiences, by developing prototypes in their Advanced Design Studio. A place blending engineering and design, blue-sky thinking, lateral and creative approaches, ‘the place where all the rules are broken’, is how Ian Callum puts it, adding, “every business should have an advanced design studio – part design and part engineering – to do the broader thinking about the future direction for products.” By developing prototypes such as the C-X75 JLR is able to push new technologies to the limits, in turn adapting these to future consumer specifications. They are a route to lateral product development and the trialling of disruptive technologies. Through JLR’s British-led design and innovative engineering JLR remains consistently committed to exceeding customer expectations of the Jaguar Land Rover experience.
Automotive is influenced by fashion trends, even seeing itself as a fashion business. With customisation and new technologies comes a greater focus on connectivity, infotainment and in-car service provision. Legislation is shaping designs of the future with a continued focus on safety and sustainability, leading to lighter materials, smaller cars, alternative transmission and propulsion systems, energy storage and radical new technology developments.
Jaguar has been investing £2bn a year over 5 years from 2012 – 2017 to design and bring around 40 new products to market. The design process itself is, at its best, a seamless collaboration between design, technology and engineering, involving ‘hand in glove’ interaction between design and engineering teams. Market research and the provision of customer intelligence is becoming increasingly important – drawing on user insights and translating these into product features, with in-car and after sales services growing in significance. The business has announced a further £1.5bn investment into new technology development to produce a scaleable aluminium architecture known as iQ[al] which will underpin range extension and new developments.
Specialist automotive design is a blend of design, brand values and ethos, customer experience, functional requirements, engineering, technology, with luxury interiors and finishes. It brings together the tangible in the form of the product with the intangible elements – how it feels and what it means to the customer, it’s ‘emotional functionality’. It’s a question of interpreting people’s tastes, expectations, desires and ultimately through design judgements fulfilling not only their aspirations but helping them to make statements about who they are. It is, as expressed by Gerry McGovern, the conduit through which everything about the brand is communicated to the consumer.
The design process itself is a fusion of art, craft skills and high tech modelling, with advanced engineering, all rooted in the reality of global markets where real customers are looking for cars to enhance lifestyles at price points they are prepared to pay. Future competitiveness will depend on our capability to produce talent, expertise, research and development capacity able to adapt to, and meet these wide-ranging commercial needs. There is considerable work to be done in building supply chains and the new links and partnerships which will be required to compete in future. We need to provide the means to facilitate the UK car industry to get better at collaboration, in turn focussing on key strategic areas that will increase our leverage and influence on markets worldwide. Collaboration needs to extend beyond research and development and into marketing, commercial and customer insight, sales and promotion if we are to compete effectively.
Companies, such as JLR have a leadership role in facilitating collaborative cultures, determining strategic priorities and continuing to promote key areas of strength for growing areas of UK specialisation, including design. The focus on STEM is essential, but so too is the need for an in-depth understanding of customers lifestyles and aspiration, especially in the emerging growth markets, to create products and associated services that match anticipated future needs and desires, alongside a grounding in commercial disciplines required to produce premium products destined for sale in global markets.