Press Comment : Jaguar Land Rover’s remarkable plant u-turn
David Bailey, Birmingham Post, 15th October, 2010
Jaguar Land Rover’s decision to keep open both factories in the region, at Solihull and Castle Bromwich, marks a surprising and most welcome u-turn.
Even a couple of weeks ago Carl-Peter Forster, CEO of Tata Motors, insisted at the Paris Motor Show that JLR wanted to merge plants; “the most efficient model is one large operation” he said. To be fair to JLR, it wasn’t looking to cut jobs or output in the region; rather it had been aiming to get costs down on one site where output would actually be increased.
Nevertheless, that didn’t go down too well with the unions, and the Unite union has been pressing for both plants to remain open during talks over the last year. The union has done an amazing job in clinching a deal which gives JLR cost savings through more flexible working arrangements and through lower wages for new staff in return for keeping both plants open.
Ralf Speth, CEO of Jaguar Land Rover, seems happy enough with the deal. “This is a triumph for all concerned” he said today. “We have ambitious plans for growth and the success of our products around the world and this agreement will allow us to accelerate and realise those plans.”
The landscape has also changed dramatically since a year ago when the plant closure plan was first announced. JLR sales have rebounded after the global downturn, aided by a raft of hugely popular new model. In September this year, for example, JLR sold 19,528 vehicles, some 16% up on the same period last year and sales growth was stronger for Land Rover, up 19%, than for Jaguar, up 10%.
Indeed, so far this year JLR sales are up by as much as 40% on a 2009 which was hellish for the premium sector. What’s impressive is that the firm is doing well in all markets, but especially in the booming markets of the emerging economies like China.
With JLR looking to more than double production to some 300,000 vehicles a year by 2015, to “significantly increase” the number of models in the firm’s range, with extra R&D funding coming from Tata, and JLR continuing to make profits (net profits of £272 million in the second quarter of the year), the future for the firm looks very bright indeed.” Professor David Bailey, Coventry University Business School
JLR bosses had always said they were willing to listen to “proposals for other ways to get some efficiency”, other than merging manufacturing operations, and there will be a price to pay for keeping open two plants. Partly that comes in the form of unions agreeing to increase the flexibility of working hours, thereby allowing JLR to increase the intensity of work during busy periods.
Partly it will come via pay cuts down the line. These won’t be born by current workers, who will take home a 5% pay rise in November, and another rise of at least 3% in a year’s time. Rather, the thousands of new workers that JLR plans to recruit in the future “will come in on lower rates of pay and receive lower shift premiums”, the company said in a statement today.
This is becoming something of a trend. Indeed, JLR set the pace during the downturn with workers taking a pragmatic and flexible approach to keeping their jobs by taking pay cuts, part time working and much more. They’re at it again. So, while existing workers get a decent pay rise to compensate for the cuts they had last year, new workers coming in will do so on lower wages and fewer bonuses.
JLR get to cut costs, a plant stays open and new workers will get new jobs in the future, albeit on lower starting rates of pay. The latter is especially important as with an ageing population and workforce, people leaving the firm will be replaced by younger, cheaper workers, giving the firm a competitive boost.
However, the overwhelmingly good news is that the threat of closure has been lifted from the historic Castle Bromwich plant here in Birmingham.
With JLR looking to more than double production to some 300,000 vehicles a year by 2015, to “significantly increase” the number of models in the firm’s range, with extra R&D funding coming from Tata, and JLR continuing to make profits (net profits of £272 million in the second quarter of the year), the future for the firm looks very bright indeed.
What wonderful, and surprising, news, and hats off to everyone involved.
[Source: Birmingham Post]
[Editor’s Note: Professor David Bailey works at Coventry University Business School.]