Jaguar Land Rover has launched a £2.5 billion (€2.8 billion) turnround programme by cutting costs and reducing planned investment after falling sales in all its big markets, including China, the US and the UK, pushed it into a £90 million quarterly loss.
The UK’s largest carmaker plans to cut costs by £1 billion over the next 18 months, a move that is likely to lead to job losses among its British workforce, and will reduce its investment budget by £1 billion over the same period. The company said it would also strip out £500 million from inventory and working capital.
Its second consecutive quarterly loss, which compares to a profit of £382 million in three months to end of September in 2017, comes after sales fell 13 per cent to 130,000 vehicles.
It is the first time the company notched up six months of losses since being bought by India's Tata Motors in 2008.
Britain’s largest carmaker is facing the “perfect storm” of issues from its reliance on diesel in its home market, to slowing growth in China, and the impact of Brexit, which is causing uncertainties over its operations and driving up the price of its imported components.
Diesel decline
Earlier this year the company cut 1,000 jobs at its flagship Solihull plant because of the decline of diesel, and in September moved its Jaguar plant at Castle Bromwich to a three-day week because of poor sales.
It also imposed a two-week shutdown at Solihull, the home of its high-margin Range Rover products, because of poor sales in China.
The core of its problems in the last quarter came from China, where sales halved as the market slowed and consumers delayed purchases, particularly of imported luxury vehicles, because of uncertainties stemming from the trade war with the US.
The US, its largest market, saw sales fall 4.6 per cent, while in the UK they dropped 0.6 per cent, and in the rest of Europe they fell 11.9 per cent, in part because of a new vehicle testing regime called WLTP that has hit all carmakers.
Slovakian move
Other costs came from opening its Slovakia plant, a new facility that gives the company its first large-scale, production facility outside the UK.
The group will already produce all future Land Rover Discovery vehicles at the site, but may move future products to the facility as well.
It has launched two turnround programmes - “Project Charge”, which will strip out costs and reassess investment spending, and “Project Accelerate”, which aims to fix long term structural issues with the company.
Chief executive Ralf Speth said: "Our results were undermined by slowing demand in China, along with continued uncertainty in Europe over diesel, Brexit and the WLTP changeover.
“Given these challenges, Jaguar Land Rover has launched far-reaching programmes to deliver cost and cash flow improvements.
“Together with our ongoing product offensive and calibrated investment plans, these efforts will lay the foundations for long-term sustainable, profitable growth.” – Copyright The Financial Times Limited 2018