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Business – JLR plans to shut down UK plant, pump in 800 mn

MUMBAI: Jaguar Land Rover (JLR), the British luxury carmaker owned by Tata Motors, on Thursday said it will close one of its two West Midlands
plants, introduce new products and infuse funds in a bid to drive growth and return to profit.

The new strategy will focus on the medium and long-term requirement, but has an “acute focus” on next year. It is aimed at global competitiveness , driving growth, sustaining profitability and responding to the challenges of climate change, the JLR statement said.

A person close to the company said the plan would help it to return to profit in two years. JLR suffered net loss of £41.2 million (Rs 319 crore) in the June quarter mainly because of a 52% drop in sales volumes. The car industry has been through an unprecedented recession. New car sales, including those of Jaguar and Land Rover, are down globally by 25-30 %. “This has resulted in manufacturing capacity utilisation of less than 60% at JLR, which combined with the credit crunch, has exposed fundamental weaknesses in the structure of the business,” the statement said.

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JLR has responded to the adverse situation over the past year through production and cost cuts. Production was reduced by more than 100,000 units, spending and costs were cut, employment reduced by 2,500 and pay frozen and bonuses cancelled. But this was not enough to offset the full magnitude of the downturn and the company swung from profit in 2007 to significant losses over the past 12 months, CEO David Smith was quoted in the statement. Actions taken have started to reverse the trend quarter over quarter and we now have to take the company to the next level of competitiveness, he added.

“This is a plan that recognises the impact the economic collapse has had on our business, and at the same time the opportunities that lie ahead for these two great brands. We are confident that a new more efficient and competitive structure combined with future investment will unlock the true potential of this business,” Mr Smith said. JLR intends to invest close to £800 million (Rs 6,300 crore) for environmental innovation and new technology.

The company is likely to borrow £340 million (Rs 2,680 crore) from European Investment Bank to finance the investment . A new generation of lightweight sedans, sports cars and premium SUVs, with hybrids and electrification technology will be introduced which will significantly reduce fuel consumption and carbon dioxide emission.

There will be additional derivatives and powertrain variants from core model lines too. Cost reductions include pension restructuring, lower employment costs for new hires and a focus on IT and business simplification. Volume growth, especially in emerging markets, combined with low-cost country sourcing will also reduce variable cost, the company said.

JLR may close down either its Castle Bromwich plant in Birmingham which makes Jaguar cars or its Solihull unit, which produces Range Rovers. About 800 new jobs will be created at its Halewood plant in Liverpool which will build a smaller and fuel-efficient Range Rover model, the LRX.

JLR has about 5,000 workers in Solihull, 2,000 in Castle Bromwich and 1,800 at Halewood. JLR said there will be no “compulsory redundancies” . The workers from the closed unit will be transferred to the chosen site, once it is decided which plant will be closed, said a person close to the company.

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September 25, 2009 - Posted by | Uncategorized |

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