Jaguar Land Rover Hit By Big Loss.
“JLR’s small size suggests it might need to link with another manufacturer”
Jaguar Land Rover said it lost 3.4 billion pounds ($3.9 billion) in the quarter ended December 31 after it took a major write-down in the value of its investments.
JLR, owned by Tata Motors of India, has been struggling with falling sales in China, while it underestimated the harm that diesel’s fall in popularity would do to its European business.
A couple of weeks ago JLR said it was cutting 4,500 jobs as part of a turnaround plan.
JLR said that, stripping out one-off items, it made a loss of 273 million pounds ($310 million) in the latest quarter. It said it was taking a 3.1 billion pounds ($3.5 billion) accounting charge related to muted demand in the car industry.
Chief executive Ralf Speth said the actions were part of an ongoing plan.
“This accounting adjustment is consistent with the other decisive actions that we must take enabling Jaguar Land Rover to counter the multiple economic, geopolitical, technological and regulatory headwinds presently impacting the automotive industry,” Speth said.
JLR reported strong third quarter sales in the UK and North America “but our overall performance continued to be impacted by challenging market conditions in China”.
JLR announced last November it would implement a plan, called “Charge and Accelerate”, to slash 2.5 billion pounds ($3.2 billion) in costs over the next 18 months.
Analysts wondered then if this might not be enough to turn JLR around. It faces harsh competition from German manufacturers like BMW, Mercedes and Audi which all have much greater scale to forge efficiencies.
Earlier this week Moody’s Investors Service said it had questions about JLR’s performance.
“JLR faces negative performance trends with deteriorating profitability metrics, partially driven by a weakening Chinese market, as well as sizeable negative free cash flow generation due to higher capex spending required for the development of alternative fuel vehicles, starting to exert some pressure on JLR’s liquidity position. The rating is further limited by JLR’s significant exposure to the UK,” Moody’s said.
Britain’s car market is currently weakening, as consumer worry about Brexit, scheduled for March 29.
JLR has lost sales momentum in China, despite manufacturing there.
JLR said in the last year its model line-up had expanded to include the all-electric Jaguar I-Pace, the Range Rover and Range Rover Sport with plug-in hybrid options, and the new, smaller Range Rover Evoque.
The company also plans to resuscitate the old Land Rover Defender.
One action JLR could take involves taking a long, hard look at Jaguar.
Jaguar has 6 models (excluding the very latest i-Pace electric vehicle), the XE, XF, XJ sedans – which compete against the BMW 3, 5 and 7 series – two SUVs – the F and E-Pace and the two-seat F-Type. Jaguar sold 180,000 vehicles in 2017, the equivalent of an average 30,000 per model.
The Land Rover side of the business has more potential to become viable long-term with its impressive and distinctive range of SUVs which can compete on price with the German equivalents.
But JLR’s small size suggests that it might need to link up with another manufacturer. Volvo of Sweden has benefitted from its link up with Geely of China.