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Jaguar Land Rover Slashes Workforce To Restore Bottom Line

Jaguar Land Rover Slashes Workforce To Restore Bottom Line.

“Decisive action will help deliver resilient long-term growth as Jaguar Land Rover implements cost and profit improvements”

Jaguar Land Rover said Thursday it will cut about 10% of its workforce as part of its plan to restore profitability, decimated by falling sales in China, a slump in diesel sales, and uncertainty in its British market caused by the Brexit negotiations.

The British based and Tata Motors of India owned 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.

JLR said Thursday it would cut about 4,500 jobs, mainly in Britain, from its workforce of about 40,000. No production line workers are included, it said.

JLR’s CEO Ralph Speth said the action would improve the bottom line.

“Decisive action will help deliver resilient long-term growth as Jaguar Land Rover implements cost and profit improvements. This will safeguard our future and enable vital ongoing investment into Autonomous, Connected, Electric and Shared technologies,” Speth said.

Tata Motors lost the equivalent of about $142 million in the second quarter ended September 30, compared with a profit of close to $340 million in the same period last year. JLR accounted for about 90 million pounds ($116 million) of the latest loss for a negative profit margin of 1.6% in the second quarter compared with a profit of 6.1% last year. JLR’s loss for the first half, stands at 354 million pounds ($465 million).

Big short term problems
JLR has big short-term problems in Europe. It must swiftly switch from diesel to gasoline engines and then electric ones as so-called oil-burners fall out of favor with the buying public. Politicians across Europe have focussed attention on the danger older diesels pose to public health.

Diesel’s market share slid to about 40% by the end of 2018 in Germany, Europe’s largest market, compared with 52% in 2015. In 2017, 90% of JLR sales in Britain, its largest market, were diesel.

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.

Experts say 30,000 sales per model is too small to compete with the Germans.

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. 


 

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