Mumbai: The loss-making, UK-based Jaguar Land Rover (JLR) announced a major restructuring drive under its Indian owners Tata Motors Ltd that envisages shutting down a West Midlands factory and merging its existing employee pension programme with a defined contribution scheme.
The plan to restructure includes “decisive actions to see through the next 12-18 months” a statement from JLR said. Faced with a severe contraction in demand for its Jaguar and Land Rover models, Tata Motors has rationalized production by at least 100,000 units, pared employee strength by 2,500, frozen pay and cancelled bonuses. These measures are still not enough to offset the impact of the downturn and take it to the next level of competitiveness, the statement said.
In the first quarter ended June, JLR reported a net loss of $673 million (Rs3,237 crore) in the UK. New car sales, including those of Jaguar and Land Rover, are down by 25-30% globally. This has resulted in manufacturing capacity utilization of less than 60% in JLR, which has exposed “fundamental weaknesses” in the structure of the business.
“This is a plan that recognizes the impact economic collapse has had on our business, and at the same time the opportunities that lie ahead for these two great brands,” David Smith, JLR’s chief executive officer, said in the statement.
As part of the restructuring exercise, the company plans to close down one of its manufacturing units in the West Midlands in the next five years and introduce new-generation, lightweight sedans, sports cars and premium sport utility vehicles, said the statement.
S. Ramnath, an analyst with IDFC Securities Ltd, says the planned closure is in line with expectations. “It’s a positive step directionally,” he said, adding that as the volume recovery will take time, this had to be the trigger to turn around the operations. Tata Motors spokesperson Debasis Ray said “no redundancies” are planned due to the closure.
JLR spokesperson Aleen Hugher said “800 new jobs” will be created at the Halewood plant in Liverpool, where the smallest and most fuel-efficient variant of the Land Rover will be manufactured. “We are speaking about new investments of £800 million (Rs6,296 crore), which would be completely self-funded and made in three years,” Ray added.