Jaguar Land Rover Now Targeting $3.3 Billion in Cuts
Jaguar Land Rover has increased its savings target for the year to $3.3 billion (£2.5 billion) following a $540 million (£413 million) pre-tax loss for the quarter ending in June. Losses are hardly uncommon within an industry shaken by the pandemic, but JLR went into this year already confronting an uphill battle.
In 2019, the company was deep in the midst of a restructuring plan aiming at $2.5 billion in life-sustaining savings. Unfortunately, the move required the elimination of thousands of positions as it tried to imagine the effects of Brexit and contend with falling sales in its largest markets. That includes China, which the firm assumed would offer continued growth in the months leading up to coronavirus’ big debut and increasing political tensions between the Communist Party of China and United Kingdom.
Having selected former Renault boss Thierry Bollore as its next CEO, the brand’s current leadership is basically hoping China rebounds.
Current JLR boss Ralf Speth even said that he was confident the market was in recovery. While European sales continued looking unhealthy, Chinese volumes actually pitched up to 23,726 units in the second quarter, less than 1,000 deliveries shy of the same period in 2019. However, the overall situation seems to have worsened through the summer.
In July, Chinese state-run media reported that British firms like Jaguar Land Rover could face severe consequences following the UK’s ban on Huawei’s entry into the nation’s 5G telecom network over national security concerns. “If the UK upholds such a hostile attitude towards China, Beijing may have no other choice but to strike at British companies like HSBC and JLR,” a China Global Times article stated in July.
Meanwhile, stringent emissions regulations coming out of the European Union (and China) have hurt a brand that relies heavily on SUVs to remain profitable. You’d think parent company Tata Motors would be furious, but it doesn’t have much room to be critical about profitability after announcing a consolidated net loss of $1.13 billion (84.39 billion rupees) for the quarter ending June 30th — that’s against a loss of 36.98 billion rupees just a year prior.
“The COVID-19 pandemic has deeply impacted the auto industry in Q1FY21. We see some disruption due to the intermittent shutdowns and supply chain bottlenecks,” CEO Guenter Butschek said in the release.
Moody’s Investors Service downgraded Tata’s credit rating last month and has a negative outlook on both firms. Still, the automakers remain optimistic about the future, claiming they’re in a strong position and have spread out their debt to a point where repayment won’t be an issue. Of course, if something does come up, Tata Motors has said it is already in discussions with the UK government about financial assistance for JLR.
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The Chinese Communist Party giveth, The Chinese Communist Party taketh away.
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