The Big Race To Drive Jaguar

NEW YORK TIMES
By DORON P. LEVIN

British car maker Jaguar P.L.C. has almost no money, tiny production facilities, few dealers and dwindling sales - but it has something the world automotive giants are itching to get their hands on: a brand name that denotes class.

Though it has been wounded recently by stiff competition from Japanese luxury cars and unfavorable currency fluctuations, Jaguar has proved its sedans can motivate the world's most affluent car buyers to shell out $40,000 to $50,000 or more by offering a blend of old-world styling, soft leather and richly grained wood.

While rival car makers can equal and surpass the technical characteristics of a Jaguar sedan, very few have been able to create as strong an aura of aristocracy and privilege as has surrounded the Jaguar name.

Now the Ford Motor Company and the General Motors Corporation have become rivals in a contest to either buy Jaguar or form a strategic alliance with it.

''Ford and G.M. recognize the value of the Jaguar brand - it's very, very strong in the U.S. market,'' said J. David Power, an automotive marketing consultant.

Last week, G.M. disclosed that it was in negotiations with Jaguar to form an alliance. That followed Ford's announcement last month that it was asking permission from the British Government to purchase up to 15 percent of the company. On Friday, Ford disclosed that it held 5 percent of Jaguar's stock.

How Jaguar can fend off Ford while striking a deal with G.M. isn't clear yet. Jaguar's decision to seek a partner, however, has been a reluctant but inevitable one by its management, stemming from its pressing need for a huge and immediate cash infusion to meet development costs for future products.

The nature of Jaguar's negotiations with G.M., which follow unsuccessful talks in 1988 with Ford and discussions with almost every major car manufacturer, underscore the vast and growing cost of membership in the international automotive industry, which small companies like Jaguar no longer can bear without outside help or state ownership.

Ford wishes to buy Jaguar outright, but Sir John Egan, the company's chief executive, would like to avoid that. Financial analysts are skeptical, however, that independence is a realistic goal.

After several weeks of spirited trading in Jaguar securities, risk arbitragers now are believed to own as much as 30 percent of the company, according to an estimate by Charles J. Brady, an automotive analyst with Oppenheimer & Company.

Short-term investors probably would favor an auction of Jaguar to the highest bidder, Mr. Brady said. In order to sell G.M. any shares it holds in its treasury, Jaguar must request shareholder permission. Jaguar is being represented by the London investment banking firm of J. O. Hambro Magan & Company.

Until the end of 1990 the British Government has veto power over any hostile bid for Jaguar, but the veto may be withdrawn if Jaguar requests it. Uncertainty about the company's future probably will force management to try to resolve the current situation long before the end of 1990, lest it suffer defections of key executives and engineers. Sources close to Jaguar said a decision could come in a matter of weeks. A concrete proposal to join forces with G.M. almost certainly would be challenged by Ford and other Jaguar shareholders.

Sir John, Jaguar's chief executive, guided the company from state ownership under the British Leyland mantle to public ownership in 1984. Sir John, who once worked for G.M., is extremely proud of Jaguar's improved workmanship and product quality during his tenure, said Thomas McDonnell, a company spokesman, and wishes to avoid handing control to someone else.

Jaguar's roots stretch back to 1922 and the Swallow Sidecar Company, which produced motorcycle sidecars. In 1935 the name was changed to S.S. Jaguar. By then the company, based in Coventry, England, was making car bodies. After World War II, Jaguar specialized in sports cars and ''saloons,'' the British name for luxury sedans.

It earned a reputation in racing, winning the LeMans 24-hour race five times in the 1950's. (After a hiatus, Sir John restored the racing program and Jaguar again won the 24 hours of LeMans in 1988.) Jaguar's goal of gaining financial assistance while remaining independent is based on the company's belief that by offering more models and thereby selling a greater number of vehicles, it could generate the cash to sustain continued product development. Mr. McDonnell noted that the company recently opened a $50 million research and development center. But developing models will require much more capital.