Sunday 13th January 2019

Jaguar Land Rover facing "perfect storm"

Manufacturer to cut up to 5,000 jobs as headwinds worsen

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JLR is to cut up to 5,000 administrative, marketing and management roles as it attempts to find £2.5 billion in savings to turn its fortunes around. Industry insiders have dubbed the situation it is facing as a "perfect storm" with declining diesel sales, a cautious Chinese market and global political uncertainty leaving the company highly exposed.

With the fallout from the VW emissions scandal continuing to be felt, UK sales of diesel cars declined by 29.6 per cent in 2018. This was particularly bad news for JLR, which still relies on the fuel to power a barely believable 90 per cent of its vehicles. Combined with a continued slump in saloon sales - which has seen the dynamically excellent XE and XF particularly hard done by versus their German rivals - this has spelled trouble for the British brand.

Events beyond the UK's shores have hit the company's bottom line harder still. Total car sales in China (JLR's biggest market) declined for the first time in two decades last year, as the nation's consumers reacted to the economic uncertainty surrounding the introduction of US trade tariffs. Jaguar Land Rover again found itself bearing the brunt of the impact, with its sales falling by 50 per cent against an overall industry decline of just 6 per cent.

The sudden change in fortunes for a marque which, despite previous difficulties, had seemed to be on the up since its acquisition by Tata in 2008, will come as a disappointment to many, not least the 35,000 UK workers who will remain on its books beyond the proposed staffing cuts.

Unfortunately this could only be the beginning of the beleaguered company's woes, though. Executives have expressed fears that a no-deal Brexit could cost it as much as £1.2 billion, while Donald Trump's long-mooted tariffs on European car imports could set it back a further £1 billion, JLR having sold a record 114,000 cars in the US last year.

Beyond the £2.5 billion currently being sought, rumours abound that Jaguar could be reincarnated as an all-electric brand in the not-too-distant future, better positioning it to deliver on future customer demand and lessening the burden it currently places on the far-healthier Land Rover. For now, though, the only sure thing is that against a backdrop of continued political, economic and industry turmoil, the future of the company remains as precarious as it has ever been.

 

[leakymanifold]

And yet at the same time Volvo is doing swimmingly, now selling more than JLR with a much smaller portfolio of cars and even increasing its sales in China. Suggests the fault lies with JLRs strategy somewhere other than diesel as Volvo had the same engine strategy pretty much.