A financial turnaround at Jaguar is not vital to Ford's Premier Automotive Group's target of contributing a third of the group's pre-tax profits next year.

Mark Fields, senior vice-president of Premier Automotive Group (PAG), said in Germany yesterday that Land Rover and Aston Martin, the two other British components of PAG, were about to benefit from investment in new models while Volvo was "healthy".

Mr Fields did not give any concrete predictions for Jaguar, but said making a profit was not pre-requisite of PAG's ability to contribute a third of Ford's pre-tax automotive earnings by 2006.

And he hinted that for the time being at least, Jaguar would be shielded by profits from other PAG manufacturers.

"Because we have these four brands we can compensate one brand for the other," he said.

The gloom surrounding Jaguar deepened in November when chairman and chief executive Joe Greenwell admitted that the company would lose "hundreds of millions of pounds" in 2004 and would not break even until 2007.

Ford recently pumped a further £450 million into Jaguar to help rebuild its finances.

Mr Fields used the occasion of a conference in Germany yesterday to warn that carmaking as a whole in western Europe is at risk unless competitiveness improves.

"The fact of the matter is, these days it is not a very competitive place to do business," he said.

Low-cost labour elsewhere and the emerging pool of engineers in countries such as China and India made carmakers take a hard look at where to manufacture in the future.

Mr Fields said the European Union had made a good start in assessing the impact of regulation on carmakers but noted that EU rules would add 5,000 euros (nearly £3,500) to the price of a car in two or three years. "Unless we as a continent have a very defined industrial framework and industrial policy we will lose competitiveness step by step over time.

"It will appear more like a dripping faucet. It is a huge issue we must address, and we have to do it collectively or we will wake up one day and find the bucket full."

The European automotive sector, which generates three per cent of the region's economic output and employs two million people, is being hit by slack consumer demand, adverse currency shifts and inroads by Asian rivals.

"The European automotive industry is simply not profitable in its home market," Mr Fields said, noting that nearly three-quarters of global automotive profits are made in the US. Ford yesterday said it expects PAG to turn a full year loss of £395.7 million into pre-tax profit of £160-320 million excluding special items this year.

The world's third largest car group expects earnings to fall this year as rising interest rates hit its lucrative finance operation but said it still aimed to make a profit of £7 billion (£3.8 billion) in 2006.