Jaguar Land Rover is struggling to keep going. The company recorded a GBP 469 million net loss in FY20, which was preceded by a massive GBP 3.32 billion net loss in FY19. For the June quarter the loss after tax was GBP 648 million, widening 61 percent from a loss after tax of GBP 402 million recorded in the same quarter last year.
The UK government’s bailout package, titled Project Birch, will not benefit Tata Motors. N Chandrasekaran, the company’s Chairman, has said the company is not holding any funding discussions with the government on supporting the British brands Jaguar and Land Rover.
Chandrasekaran, who is also the Chairman of Tata Sons, was addressing Tata Motors shareholders at the company’s 75th annual general meeting, held on August 25 through a video conference.
“There have been no discussions in terms of funding; we are not looking at any funding from the UK government,” Chandrasekaran said.
In March, UK Chancellor Rishi Sunak announced a GBP 350 billion package of loans and grants to keep businesses afloat in the UK. Recent news articles in the UK reported that Tata Motors was looking for GBP 1 billion in funding for JLR. However the Mumbai-based automaker never officially spoke about it.
Struggling to keep the engine running
JLR secured about $705 million from Chinese banks in June in the form of unsecured three-year term loans. This loan pushed up its total debt to $6.5 billion as of June 2020, an increase of 11.5 percent over March 2020, and a nearly 30 percent jump from June 2019.
During the June quarter JLR’s worldwide retail volumes stood at 74,067 units, down 42 percent from the 128,615 units clocked in the same quarter last year. Capacity utilisation across its plants currently stands at 61 percent.
Jaguar Land Rover recorded a GBP 469 million net loss in FY20, which was preceded by a massive GBP 3.32 billion net loss in FY19. For the June quarter the loss after tax was GBP 648 million, widening 61 percent from a loss after tax of GBP 402 million recorded in the same quarter last year.
After posting its second consecutive annual loss last year, JLR has gone for a massive belt-tightening exercise. To bring in efficiencies it is aggressively reducing costs and cutting back on undeclared but unviable projects. Tata Motors has also decided to scale back capital expenditure at JLR by 45 percent to GBP 2.5 billion in FY21.
Job cuts
In mid-June Unite, the UK and Ireland’s largest union, protested against the axing of 1,100 agency workers at JLR factories. This included around 400 job losses at the Solihull plant, with the remaining job losses spread over the company’s other sites in the West Midlands and Merseyside.
“We don’t know if the number of employees will be coming down further this year”, Chandrasekaran added.
More than 20,000 Jaguar Land Rover employees were furloughed in April, which was down to 10,000 in July. Collectively the employees received GBP 140 million in entitlements from the government. JLR is also expecting a continued reduction in headcount.
“The absolute number of people within the organisation continues to fall. It was down to 37,400 in March and that will reduce 2 percent or 3 percent in the first half and continue probably in the second half as well,” Adrian Mardell, CFO, JLR said in a recent interaction with analysts.