Press Report : JLR chief explains why motoring icon must have Government aid

John Duckers, Birmingham Post, 11th December, 2008

The seriousness of the crisis facing Jaguar Land Rover – as well as the rest of the world’s carmakers – was spelled out at a unique round table meeting at a Birmingham restaurant. The Birmingham Post reports.

Jaguar Land Rover Chief Executive David Smith has urged the Government to support the ‘jewel in the crown” of the British car industry. The company is, he said, ‘one of a handful of high tech, global icons, the UK has left”. And he warned that its future was at risk if a bail-out package for the sector did not materialise.

His comments, in a special interview with the Birmingham Post, came as business minister Lord (Peter) Mandelson continues to ponder whether to help and, if so, how much to offer. Lord (Kumar) Bhattacharyya, head of Warwick Manufacturing Group and an adviser to the Government, has called for £1 billion. The industry across Europe is asking for about 40 billion euros (£35 billion).

Mr Smith revealed that parent company Tata, the Indian group which bought JLR for $2.3 billion (£1.15 billion) earlier this year, had already pumped hundreds of millions of pounds into supporting the business, albeit on commercial terms. He said government backing on top of that was required in the form of short-term loans because of the difficulty of obtaining credit in the wake of the banks reining in their lending.

JLR has already cut back, with a total of 600 voluntary redundancies sought across the group in two separate job loss programmes. In addition, 850 agency staff are going. Land Rover has seen night shifts axed and an extended shutdown for Christmas and New Year. But, without Government aid, worse could follow.

Mr Smith said: ‘We need to maintain employment and the skills base. It would be a tragedy if JLR had to lose further skilled workers because of the unavailability of finance.” He cautioned that sales were likely to be down 35 per cent in the fourth quarter. JLR, said Mr Smith, had made a profit of £400 million in 2007 and had notched up a surplus of £400 million in the first half of 2008 alone.

He would not be drawn on likely second half or 2009 results but acknowledged that the credit crisis would affect the figures. The company has previously warned that conditions were unlikely to improve for at least 18 months.

Mr Smith sought to spell out just how high the stakes were. He noted that JLR employs 15,000 people in the UK and spends £400 million a year on research and development, half the automotive industry total. It exports 80 per cent of its production – to 160 countries. Its £7 billion annual turnover is about the same as that of Marks & Spencer and it spends £800 million a year on environmental innovation. JLR has 300 suppliers and spends some £2.5 billion a year with those in the UK. It all means that directly and indirectly some 75,000 jobs depend on JLR.

Outlining the company’s technological advances, Mr Smith said it was investing in skills, low carbon technologies and the use of lightweight products, such as aluminium. It is about to launch a micro-hybrid in a Land Rover Freelander, a global first, and is working on one of the world’s first diesel hybrid systems, also in a Land Rover, which would deliver 60 miles to the gallon. It is also researching advanced extended range hybrid systems which would allow five times the current 100 miles limit. Its collaboration with the supply base and local universities means that it is in effect the ‘critical hub” if the UK is to develop an industry in low-carbon vehicles.

JLR is doing well in Russia and China and was about to launch in India. It now outsells BMW in Brazil and Russia and is number one in the US in the JD Power league tables for both customer and sales satisfaction. Land Rover has already totally renewed its product range while Jaguar has produced the top-selling XF and has a new top-of-the-range XJ saloon scheduled for next year. It has already shown off a small urban Land Rover concept codenamed the LRX.

Over the next five years JLR would unveil seven new models, said Mr Smith. But the credit crunch had seen a big impact on consumer confidence, cutting sales across the world and the whole supply chain is fighting a liquidity issue, with credit very hard to obtain. ‘It is an urgent priority that the banks start to provide that financing,” Mr Smith said.

JLR is having to help out its dealers and suppliers – about half a dozen suppliers are finding it particularly difficult. ‘They are good companies but they cannot get commercial credit. They are suffering from cashflow issues.” Mr Smith claimed the UK situation was very different from the US where the Big Three of General Motors, Ford and Chrysler have also been asking for big government bail-outs.

He said the UK sector was competitive, having taken its pain in previous years. It had improved productivity, had good products and was technologically innovative. ‘Our issue is about the lack of availability of credit during this very turbulent period,” Mr Smith said.

Tata is a solid business that had taken much time in understanding the JLR operation and the needs of the workforce, and had put trust in local management teams. It is aware of the depth of technology, the talents of its people and the strength of the company’s assets. ‘It is strategically significant for the West Midlands in having a strong Indian partner,” Mr Smith said.

‘Yet all these things are potentially at stake. We very much hope Lord Mandelson will support the jewel in the crown of the British car industry.”

[Source: Birmingham Post]

Clive Goldthorp

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