Jaguar Land Rover sales drive parent Tatas profits Buying the British car marques at the height of financial crisis is paying off for Tata as they near help triple parent groups profits Demand for Range Rover’s Sport and Evoque models and Jaguar’s new F-Type sports car have helped drive up profits at Tata Motors, the Indian owner of the British car marques. Tata reported net profits had more than tripled to 53.98bn rupees (£526m) for the three months to June, powered by the success of the British car brands it purchased from Ford in 2008 for £1.3bn. Jaguar Land Rover (JLR) has become one of the best performing parts of the Tata conglomerate – whose interests range from steel to tea, and hotels to power generation – thanks to the renaissance in British car design and engineering. Five years ago Tata Motors paid Ford £1.3bn for Jaguar Land Rover, the luxury car and utility vehicle group that has promised so much for its owners over the years and delivered so little. At the time, Ratan Tata, chairman of an Indian group with small cars and trucks in its motor portfolio as well as Tetleys and steelmaker Corus from its earlier takeover forays into Britain, was told he was out of his depth in attempting to succeed where Ford, BMW and others had failed make JLR purr productively and profitably. But the Indian industrialist has proved the sceptics wrong in a spectacular fashion. A relaxed but adventurous business style, a product range that holds more appeal and a little luck has turned JLR into the business steal’ of the decade. Sales are up by 100,000 cars to almost 360,000 – 80pc of them overseas - on the back of an impressive Land Rover performance over the period. Jaguar sales were down 12,000 to just under 54,000 last year but are showing a marked recovery following the launch of new models. The international appeal of the Land Rover range has increased sales by more than 107,000 to 303,000 units. JLR has been self-financing since Tata took the wheel. The red ink has disappeared with pre-tax profits last year almost touching £1.7bn from revenues close to £16bn. Around 9,000 jobs have been created in the three British plants, including 1,700 announced last week. Another 24,000 jobs could be added to a supply chain now enjoying the fruits of JLR’s success. Controversially perhaps for purists of this very British’ brand, a joint venture with Chery Automobile will see JLR vehicles assembled in China, the group’s most important market. Saudi Arabia is next on the overseas assembly list while JLR is pumping almost £2.75bn into group research and new products this year. The scale and speed of change since the arrival of new owners has been one of the key factors behind the buoyant performance of the British motor industry in difficult markets. Half the 500,000 unit increase in car production over the last four years is down to JLR’s bigger contribution. There are other spin-offs. The West Midlands, one time heartland of the British motor industry, is benefiting from what is being termed locally as the JLR effect.’ Confidence is growing from suppliers down to the regional grass roots where Jaguar is part of the motoring heritage. “JLR has had an effect on the region but it’s not just local, it’s national,” says Car industry expert and JLR watcher Prof David Bailey of Coventry University. But it’s still early days in the JLR rejuvenation under Mr Tata and questions remains about whether the new owners and the current generation of JLR engineers – more than 7,000 of them – can make the great leap to reach the scale and size of BMW, Mercedes or Audi. Tata almost walked away after the Labour Government set out tough terms for financial help when the takeover coincided with the economic downturn but stayed the course and is now reaping the benefits “Ford invested very heavily because they wanted to be in the premier part of the market,” said Prof Bailey. “They messed up for a long time but towards the end they were getting things right in terms of re-positioning JLR as a major player. They had a great product pipeline going but simply ran out of cash. Tata picked JLR up cheaply but to be fair to them they’ve invested very heavily in new models and research during the recession.” A shortage of skilled workers risks slowing the pace of development and straining relations with suppliers equally anxious to grow with their biggest customer. Over the last three years JLR has recruited almost 1,000 graduates and embarked on an extensive programme among 250,000 youngsters to get them to think more seriously about engineering as a career. There are costly strategic issues involving product, technology and size. “They’ve got to double in size very quickly over the next few years while maintaining quality and keeping costs down,” said Prof Bailey A large slice of the investment is likely to be on more overseas assembly ventures. JLR currently has three assembly plants in Britain – Solihull (3,500 employees) and Halewood (2,500) build Land Rovers and Castle Bromwich (1,100) is the Jaguar home. The development of a new engine manufacturing plant at Wolverhampton (1,400) costing £500m will reduce dependence on Ford for engines but JLR risks over stretching itself and the engineering world by adding another vehicle assembly plant without a considerable addition to the labour pool. Increased efficiency and productivity offers some headroom at a time when the Land Rover plants are running flat out to meet demand. Solihull has been operating a three shift around the clock 24 hour production cycle for the past year to satisfy customers. The Jaguar car range lags behind the opposition in model terms and is a priority for the introduction of what Dr Ralf Speth, JLR chief executive, describes as the “all-new aluminium monocoque architecture.” A mid-sized sports car next year will be the first new Jaguar from the £1.5bn new aluminium product programme at Solihull. There is more to come. Bob Joyce, JLR’s group engineering director, told a conference organised by the Engineer magazine earlier this year about how designers are turning the car into an “extremely sophisticated internet-enabled device.” Jaguar has taken more than a decade to reach the starting line. For years a catalogue of blunders and an almost permanent shortage of funds combined to wreck the achievements of designers and engineers in matching the sleekness and power of the cat with the product on the road. Now Jaguar and Land Rover are the only survivors of the series of attempts made to create a strong’ British motor industry to compete in world markets. They were among almost 15 British marques bundled together by the Industrial Reorganisation Corporation to form the British Leyland Motor Corporation in 1968 into a more powerful and efficient operation. Austin, Morris, Wolseley, Riley, Leyland, Standard, Triumph and MG were among others who found themselves thrust together with a Government sweetener. The volume car approach was not suited to the specialist operations of Jaguar while Land Rover, the Jeep type copycat, was already well established in export markets so they formed a separate unit inside BLMC. Tensions and jealousies among front line managers, proud engineers and work forces more committed to separation than integration strained relations and weakened management. It was a common complaint at the time that workers spent more time on strikes than on the production lines. Geoffrey Robinson, now Labour MP for Coventry NW, former Paymaster General and one of the IRC motor industry reorganisation team had a two year spell heading up Jaguar between 1973-75 before falling out over reorganisation plans. He was unhappy with the way Sir Michael Edwardes, then BLMC chairman was running the business and told him so. He was one of two Robinsons prominent in BLMC operations at the time. The other was militant union leader Derek Red Robbo’ Robinson, sacked by Sir Michael for allegedly causing labour unrest and strongly defended by Geoffrey Robinson. By 1975 BLMC was bust and the Government was left to pick up the pieces complete with a shortened name British Leyland. Jaguar was a financial drain on its new parent and when Sir John Egan was appointed chairman in 1980 he was told in no uncertain manner to close the business if he failed to turn it around. At the time Jaguar was losing £50m a year and 9,200 workers were building just 14,000 cars a year. Sir John, a marketing rather than a car man, used his flair as a salesman to keep the business on the road but admitted later it was a close call. Enter Ford, searching for a place in the premier car league. A bid of £1.6bn put Ford in the driving seat and complaining it had overpaid after taking a closer look at Jaguar’s worn out production kit accused Sir John of selling a business worth only £300m in asset terms. Sir John’s tongue in the cheek reply is colourfully recorded by Ray Hutton in his new book on the Tata deal Jewels in the Crown: “When you go to a fancy restaurant you go for the steak and the sizzle. You have paid £300m for the steak and £1.3bn for the sizzle.” Land Rover meanwhile had been sold by the Government to BAeSystems along with the rest of BL for a giveaway £150m. The aerospace group then collected £800m from BMW for the Land Rover package. The German giant toiled unsuccessfully to come to terms with the British production mentality and was losing £2m a day on its purchase before selling the rump of the business – the Mini remained under German ownership – to an eager Ford for £1.85bn in 2000. The Land Rover was the final fit in a Ford Premier Automotive Group that had Aston Martin as well as Lincoln, Volvo and Jaguar in membership. Ford planned to turn Jaguar into a 200,000 a year production unit but quickly ran into an image problem by integrating production platforms and seeing the Jaguar X become the Jaguar Mondeo. Tata has delved deeply into the Jaguar history and wants to add value, prestige and profits. So far a back of the envelop calculation by analysts suggests Tata now has a steak and sizzle’ worth $16bn. In the quarter ending June 30, JLR’s revenues hit £5.4bn, up £1.3bn - a 31pc rise - on the same period last year, and pre-tax profit more than doubled from £415m to £924m. Ralf Speth, chief executive, said: “This financial performance reflects Jaguar Land Rover’s award-winning product portfolio. We are committed to inspire customers with exceptional premium vehicles, delivering the highest standards of quality, technology and customer service. We delight people with experiences that they will love, for life.” Land Rover’s total retail sales rose by 24pc to 96,000 with the Range Rover Sport the stand-out performer, as demand for the off-roader which starts at £61,250 rose by 81pc. The new F-Type took the honours at Jaguar, with retail sales of the sports car rising 65pc and helping push the marque’s total sales 12pc higher to 19,600 over the period. China remained the biggest market for the company, increasing its stake of sales over the period to 28.5pc from 21.6pc over the same three months in 2013. The purchase of JLR as financial crisis was at its most fierce was seen as a gamble by Tata at the time, but has proved to be a shrewd decision. The parent company also produces the world’s cheapest car, the Nano, as well commercial vehicles in its home market, but said net profit in its Indian operations fell as a result of the country’s economic slowdown. Tata has lost market share to rivals in Indias auto market over the past year and sales of its domestic trucks and buses fell by 28pc 110,612, though the group still dominates the sector. Helped by JLRs strong performance, Tatas consolidated revenues over the period rose 38.2pc to 646.83bn rupees.
Posted on: Tue, 12 Aug 2014 02:02:55 +0000
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