News : 5 October 2008

News digest

Compiled by Clive Goldthorp

1) SAIC Motor/MG and Roewe

MG Sales Hurt by SAIC Personnel Changes
China Morning Post, 22nd September, 2008

The sales of MG-branded cars have been badly hurt by the personnel changes at Nanjing Automobile (Group) Corp.

Statistics show that MG’s monthly sales volume during the first five months of this year was not more than 400, compared with monthly sales of about 800 units from September to December 2007. It is the frequent personnel changes Shanghai Automotive Industry Corp. (Group) (SAIC) launched in senior management of Nanjing Automobile that leads to the poor sales of MG, pointed out industry experts.

SAIC, parent of Shanghai-traded SAIC Motor Corp. Ltd. (SHSE: 600104), inked a contract to acquire Nanjing Automobile from Yuejin Motor (Group) Corp. at the end of December 2007. After the deal, SAIC launched a series of personnel changes on the senior management team of Nanjing Automobile.

It appointed Huang Keji, a top executive with Shanghai GM Dong Yue Motors Co., Ltd., as the general manager of MG in February this year. He was asked to take charge of the production and product quality at MG and Zhang Xin, a top executive with Nanjing Automobile, was asked to be responsible for the sales at MG.

SAIC did not make many adjustments on the marketing team of MG so as to stabilize the latter’s sales network in the country.

However, Zhang Xin resigned and then joined in Beijing Automobile. Sun Weijian, also a senior executive with Nanjing Automobile, resigned and then jointed in Chery Automobile Co., Ltd., one of the biggest homegrown automakers in China. Those resignations directly led to the poor sales of MG 7 series cars. In order to change the dropped sales, SAIC nominated Xue Zhenghua, a top executive responsible for marketing at Shanghai Volkswagen Co., Ltd., as the executive assistant to the general manager of MG. However, the management change disappointed everyone as not much improvement was seen in MG’s sales volume.

Actually, the fusion of the management team of Nanjing Automobile and SAIC did not go smoothly, revealed people close to the deal. Many positions at MG are seated by two persons. Notably, the quality system of Nanjing Automobile is different from that of SAIC, which therefore delays the rollout of MG new car models. SAIC will make adjustments on the marketing team of MG provided that there is no breakthrough in MG’s sales.

2) Jaguar and Land Rover

Tata reports strong start for Jaguar Land Rover at Halewood
Alistair Houghton, Liverpool Echo 24th September, 2008

JAGUAR Land Rover’s owner Tata Motors says the company has had a strong start to the year despite reporting a six-month loss.

Tata said JLR, which employs 2,000 people at its Halewood manufacturing plant, posted a bumper £372m operating profit in the first half of the year, following a £351m operating profit in 2007, but said accounting adjustments meant the group reported an overall loss of £207m after tax.

It follows years in which JLR failed to make a profit for previous owner Ford. This is the first time JLR’s figures have been made available separately, as they were previously part of Ford’s Premier Automotive Group division which also included Volvo. Indian giant Tata has again warned that conditions in coming months will be tough for JLR – and says its company’s plans to sell more new cars in Asian markets may not be enough to offset sales slumps in key markets hit by the credit crunch.

Tata has issued a prospectus for a new share issue that it hopes will raise £487m towards some of the costs of its acquisition of JLR. The prospectus shows that for the six months to June 30, JLR made an operating profit on revenues of £4.5bn. It reported a loss after tax and other adjustments, but a JLR spokesman said that reflected accounting adjustments made by Ford including a £492m payment on deferred tax and debts.

Tata completed its £1bn-plus takeover of JLR in June. Days later Ratan Tata, the company’s chairman and one of India’s richest men, visited Halewood to mark what plant managers described as an ‘exciting new era” for the factory. Halewood produces Land Rover’s Freelander 2 and Jaguar’s X-Type car. The Freelander 2 has been a huge hit for Land Rover. Last year it saw worldwide sales of 65,363, including UK sales of almost 19,000.

Land Rover has enjoyed three successive years of record sales, with 2007 marking the first time the brand had sold more than 200,000 vehicles a year. But it has already warned that sales would fall as the credit crunch bites in its key UK and US markets. Both Jaguar and Land Rover are looking to increase sales in new markets, such as India and Russia, to make up for falling sales in the West.

But in Tata’s prospectus yesterday the company said: ‘Consumer decisions as to whether and when to make a vehicle purchase may be affected significantly by general economic conditions, including the cost of purchasing and operating a vehicle and the availability and cost of credit and fuel. ‘In view of recent high crude oil prices and weak economic conditions in certain large auto markets such as the US and Europe, many markets are witnessing or are likely to witness steep demand contraction.

‘Jaguar Land Rover’s strategy which consists of new product launches and expansion into growing markets such as China and Russia may not be sufficient to mitigate the decrease in demand for Jaguar Land Rover’s products in established markets, which could have a significant adverse impact on Jaguar Land Rover’s (and consequently the company’s) financial performance.”

Land Rover is developing new vehicles and new technologies to meet growing demand for more environmentally-friendly and fuel-efficient vehicles. Its small LRX ‘concept car”, which can run on a hybrid engine and use bio-diesel, has been well-received by analysts and motoring journalists and is likely to be built at Halewood if it goes into production.

Jaguar and Land Rover post $383m loss
The Times 24th September, 2008, Rhys Blakely

Jaguar and Land Rover recorded a loss of $383 million after tax in the first six months of the year, according to a rights issue prospectus filed by Tata Motors. The Indian company bought the luxury marques earlier this year from Ford for $1.15 billion.

The detail of just how much money the two carmakers are loosing will cement concerns that Tata, India’s largest truck maker, will have its work cut out in making its first foray into the luxury car market a success. A spokesman for Tata said that the loss detailed in the most recent accounts for Land Rover and Jaguar did not give the best picture of the units’ performance.

It pointed to figures showing that the earnings before interest and tax of the two carmakers combined was $688 million in the six months to the end of June. Tata’s purchase of Land Rover and Jaguar has, however, already faced several serious hurdles. Last month, Tata Motors was forced to scrap a planned 30 billion rupee (£352 million) rights issue that was to help finance the group’s acquisition of Land Rover and Jaguar.

It cancelled the convertible preference share issue after its share price plummeted. It now intends to sell assets instead to raise the cash, which is needed to refinance an expensive bridge loan. However, plans for two other rights issues to raise a further 42 billion rupees remain intact. The prospectus for those issues, from the Indian bank JM Financial, contained the breakdown of Jaguar and Land Rover’s performance.

Meanwhile, sales of Land Rovers are sharply down in important markets, such as the US, in the wake of the sub-prime crisis. There are also concerns that the surging costs of raw materials may scramble Tata’s plans to reap profits from its 1,250 Nano, which will be the world’s cheapest car when it goes on sale this autumn in India.

The construction of the factory being built to produce the Nano has ground to a halt after being besieged by thousands of demonstrators.

Jaguar Land Rover names new president of U.S. unit
Chrissie Thompson, Automotive News Europe 25th September, 2008

Gary Temple will serve as the next North American president of Jaguar Land Rover America, the company said Wednesday in a statement. Temple, 65, a 25-year veteran of the company, most recently served as senior executive vice president of operations for North America. As continent president, he will oversee North American sales, marketing and service operations for the company, currently based in Irvine, California.

The U.S. unit, acquired by Tata Motors June 2 from Ford Motor, is in the process of moving its headquarters to New Jersey. Temple’s appointment was effective immediately. He replaces Mike O’Driscoll, who recently became the managing director of Jaguar Cars.

Jaguar Land Rover to close Halewood plant for a week
Duncan Tift, Birmingham Post 26th September, 2008

Luxury carmaker Jaguar Land Rover will close its plant in Merseyside for a week due to falling demand. The company announced the Halewood factory would be shut from October 27-31, although staff will continue to be paid.

The shutdown is the latest round of production cuts to be announced by the firm in the past few weeks. Falling demand has already led to cutbacks at the company’s sites in Castle Bromwich and Solihull. The situation creates a gloomy picture for the company as it prepares for one of the biggest dates in the European automotive calendar – the Paris Motor Show, which starts next week.

However, the firm is not the only one under a cloud. Bentley has recently announced similar cutbacks while Toyota has scaled down its global production estimates, based on poor sales in the vital United States market. JLR said yesterday that it would use the Halewood closure to evaluate its production in line with the current slump in demand.

‘This is half-term holiday week and, traditionally, this has always been a week when production ceased at Castle Bromwich and Solihull, although not at Halewood. The halt in production is to try to match production to demand,” said a JLR spokesman yesterday.”

It has ruled out speculation that a complete shift could be axed next year. The former Ford plant, which employs around 2500 people, builds the Jaguar X-type saloon and the Land Rover Freelander. Jaguar announced last week that it was easing output at its Castle Bromwich plant, while Land Rover said last month that it had axed a night shift at its Lode Lane factory in Solihull and was putting some models on a four-day week production cycle.

While the latest move is a blow, it is not unexpected. Speculation about the fate of operations on Merseyside had begun as soon as the first announcement of cutbacks had been made. Despite the economic downturn however, the company has yet to announce redundancies. Skilled workers are hard to find and with demand for the award-winning Jaguar XF still relatively good, the company will want to make hay for as long as it can.

However, there is another factor which cannot be ignored and that is demand for the vehicles in the emerging markets. Both Jaguar and Land Rover are forging new markets in Russia and China. Land Rover, despite reduced demand in its established markets to the UK and the United States, still sells into around 160 markets around the globe – even if some only take very small numbers.

However, if they are combined, they go a long way toward offsetting falling sales elsewhere. Nevertheless, Tata, which acquired the luxury brands earlier this year in a £1.15 billion deal with Ford, will be unhappy. It is having to make the announcements just as it is encountering difficulties with its domestic operation. It was due to launch its much anticipated Nano microcar – billed as the world’s cheapest car – next month but the production has been beset by problems after farmers angry about not being compensated for land swallowed up by a new factory staged a series of protests against the firm.

It is now switching production to its other plants in India to try and avert further delays.

Land Rover night shift on hold until next year
Duncan Tift, Manufacturing Correspondent, Birmingham Post 26th September, 2008

The axed night shift at Land Rover’s Solihull plant is unlikely to be reinstated before the end of the year at the earliest, the company has said. The announcement is the latest move in a series of production cutbacks to afflict the luxury carmarker and came just 24 hours after firm revealed it was shutting its plant in Halewood on Merseyside for a week at the end of October to help ease over-supply.

Jaguar Land Rover, now owned by India’s Tata Motors, said at the end of last month that from the beginning of October production of the Range Rover would be reduced from two shifts to one. The company has not said by how many units a week production is being cut. Staff who work on the two shifts will either work on day assembly or be redeployed on completing partially assembled vehicles, training or track maintenance work.

There has been speculation amongst the company’s 13,000-strong staff that redundancies can now not be far away. Despite the fears, the company has not made anyone redundant although it has said this cannot ever be guaranteed. Company spokesman Mark Foster, who confirmed that there were no plans to reinstate the shift in the immediate future, said: ‘No manufacturer at any time, let alone the period we’re going through at the moment, can give a guarantee on job numbers.”

Workers at the Lode Lane plant said they had never known the situation to be as bad as it is now. In addition to the Halewood closure, Jaguar announced last week that it was easing output at its Castle Bromwich plant. The Merseyside plant, which employs around 2,500 people, builds the Jaguar X-type saloon and the Land Rover Freelander.

The situation is not one the company would have chosen for itself just days before it goes under the spotlight at the Paris Motor Show. It will be hoping the exhibition can give fresh impetus to its popular and awarding-winning XF saloon as well as its luxury 4×4 models. The latter have been especially badly hit by declining sales in the United States and Europe although demand for them in the emerging markets of China and Russia continues to grow.

Meanwhile, parent company Tata Motors is said to be in talks with private equity funds to sell up to 25 per cent each in six unlisted units. Reports in India said the country’s largest automaker planned to raise around £350 million from sales of stakes in subsidiaries including Tata Daewoo Commercial Vehicle, HV Transmissions, Tata Motors Finance, Tata Technologies and Telco Construction Equipment.

Tata has declined to comment on the situation, other than to say it had already announced its intention to review its investment portfolio and pursue a programme of ‘monetising certain investments over the coming quarters”. It is believed that Tata may be looking to generate cash to help pay for the acquisition of JLR, which it took over from Ford in April at a cost of £1.15 billion.

Despite buoyant sales of the Jaguar XF, the company has been hit hard by the decline in global markets and earlier this week Tata revealed that JLR had recorded a loss of £206 million after tax in the first six months of the year.


Next Mini set to be built outside Britain
John Cranage, Automotive Correspondent, Birmingham Post 2nd October, 2008

The next new Mini could be built outside the UK, parent group BMW said. The new car – set to be the biggest Mini ever built – is a Crossover concept that combines a saloon car with four-wheel drive. The car was unveiled for the first time at the Paris Motor Show on Thursday.

An announcement about production plans will be announced soon, said BMW group sales and marketing director Ian Robertson. With BMW’s Mini plant at Oxford now running at almost full capacity, there is speculation that the Crossover is likely to be built abroad. Mr Robertson would not be drawn on where the car will be built, except to say: ‘It might be somewhere else other than Oxford.”

Nor would Mr Robertson, the first ever British main board director at Munich-based BMW, say whether engines for the Crossover will come from the group’s engine plant at Hams Hall near Birmingham. The factory produces all BMW’s four-cylinder engines including those for the Mini. ‘We don’t know yet where the engines will be sourced,” Mr Robertson said.

He earlier gave an upbeat assessment of Mini’s sales in the current financial crisis. ‘Mini is the world’s fastest growing premium brand and in the US sales have increased by 25 per cent in the last nine months are up by well over 25 per cent here in France.

‘Up to the end of September we had sold 180,000 Mini’s nine per cent more than in 2007.” Mr Robertson said BMW was planning a series of events to celebrate the 50th anniversary of Mini next year.

4) India Watch

Report: Tata begins exit from Nano site
Automotive News Europe 24th September, 2008

MUMBAI (Reuters) — Tata Motors, India’s top vehicle maker, has started moving equipment from its factory in eastern India, the Times of India newspaper said on Wednesday, as the company scrambles to launch the ultra-cheap Nano car as planned. Tata Motors, which had planned to launch the Nano around October, had suspended work at the plant in Singur in West Bengal state earlier this month due to violent protests by farmers unhappy with the compensation offered for their land.

While talks between the state and opposition politicians backing the farmers were still underway, attacks on two security guards at the factory on Monday “might have been the last straw”, the Times of India said, citing unnamed government officials. Earlier, NDTV Profit news channel had reported the company was likely to make a public announcement about its exit from West Bengal next week “unless something dramatic happens very soon”.

A spokesman for Tata Motors declined comment on the reports. At the time of suspending work in Singur on September 2, Tata Motors had said it was considering alternate locations to make the Nano, billed as the world’s cheapest car. Last week, Tata Motors, which aims to price the Nano at just above 100,000 rupees ($2,183), said southern Karnataka state, where it is already building a commercial vehicle plant, had offered land.

Tata Motors’ managing director said at the time they were “actively” looking at alternatives including Karnataka. Other states have also made offers to the Tatas, India’s second-largest conglomerate with interests ranging from salt to software. “It is doubtful at this stage whether Tata Motors will be prepared to sit and wait for at least another fortnight for the situation to be resolved,” said Ian Fletcher, automotive analyst at research firm Global Insight in London. “The other alternative is to move the entire project to one of the other states that have expressed an interest … but it is uncertain whether Tata would be prepared to undergo such upheaval so close to the completion of the project,” he said.

Cost overruns caused by the delays in Singur have already raised the cost of the Nano project. The company, India’s third-biggest carmaker, may be able to roll out a few hundreds or a few thousands of Nano cars from a plant in northern Uttarakhand state or from the western city of Pune, analysts have said. But the rollout will fall well below the planned initial capacity of 250,000 units at the Singur plant.

The launch of the Nano in October, the peak of the festival season in India when demand rises, is crucial for the company, which is seeing softer demand for its dominant commercial vehicles because of high interest rates and fuel prices.

Keith Adams

Be the first to comment

Leave a Reply

Your email address will not be published.


This site uses Akismet to reduce spam. Learn how your comment data is processed.