Ford's UK success marred by global pre-tax losses

As the new generation of Land Rover's Freelander rolls off a production line in northwest England it marks a triumph for the …

As the new generation of Land Rover's Freelander rolls off a production line in northwest England it marks a triumph for the Halewood factory. It was once the worst for quality and productivity in Ford's global empire but is now the best.

However, the celebrations will be muted after the news on Monday that Land Rover and sister brand Jaguar, have once again been hit by quality problems.

Ford announced a surprise increase in pre-tax losses to €473 million for its Premier Automotive Group (PAG) - which includes Volvo and Aston Martin alongside Jaguar and Land Rover - for the third quarter, up from €86 million a year before.

It blamed extra costs for repairs under warranty for the bulk of the rise in costs, although it was also hit by falling sales everywhere, except at Aston, and rising advertising costs.

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Don Leclair, Ford chief financial officer, said quality problems had been fixed for vehicles now being built, and much of the cost applied to models already out of production.

Overall Ford's accounts plummeted $5.8bn (€4.6bn) into the red in the third quarter, its worst for 14 years and demonstrated the scale of the challenge faced by its new chief executive, Alan Mulally, who was recently poached from Boeing. In its key US market, Ford's sales fell from 774,000 to 710,000 cars as high petrol prices knocked sales of sports utility vehicles.

While the problems centre on falling US sales, Europe continues to get a share of the blame from head office in Dearborn.

Alan Mulally, who took over as chief executive last month, added to pressure on PAG employees by refusing to rule out the sale of additional brands beyond Aston Martin, currently being auctioned.

"It is going to hinge on how the businesses are going and whether we can make a profitable business out of them," Mr Mulally said. "Clearly reviewing that is high on my list of priorities."

Ford has told at least one potential buyer for Jaguar, Sir Anthony Bamford of the JCB construction machinery group, that if it went ahead with a sale it would wrap Jaguar and Land Rover together. Investment bankers who have examined the finances believe the heavily lossmaking Jaguar unit is worthless but that Land Rover could appeal to trade buyers.

Quality problems have been at the heart of Ford's failure over a decade and a half to turn Jaguar into a competitor to BMW and Mercedes.

But the dramatic transformation of the Halewood factory, together with better engineered vehicles, had propelled Jaguar close to the top of independent quality measures, even as sales slumped in the past two years. In the last two annual surveys by JD Power, the US consultancy, Jaguar came second only to Lexus among luxury brands.

Ford has been trying to reproduce Jaguar's improvement in quality at Land Rover's Solihull factory in the English Midlands, to deal with consistently poor ratings.

Mark Fields, now head of Ford's US operations, threatened when running PAG to withdraw investment from Solihull and eventually close it if the plant did not improve to match Jaguar quality. PAG insisted on Monday that the Solihull improvement plan was "making progress", and said quality problems had been caused by the "launch spike" of several new Land Rovers, including the Range Rover Sport and Discovery, in the past two years.