JLR currently employs around 4,000 people at its Halewood factory but this number is likely to fall as the coronavirus crisis forces it to seek an extra £1bn in cost savings in 202/21. Tony McDonough reports
Carmaker Jaguar Land Rover (JLR) says it will have to slash costs by £2.5bn in the current financial year – £1bn more than its original target of £1.5bn.
JLR currently employs around 4,000 people at its Halewood factory, assembling the Ranger Rover Evoque and Land Rover Discovery Sport, but it is expected jobs will go from the site in the coming months as the company continues to grapple with the COVID-19 crisis.
In June, JLR reported pre-tax losses for the full year to March 31 of £422m, from revenues of £23bn. In the final quarter alone the losses hit £501m as the coronavirus crisis caused shutdowns in key markets in China and Europe.
In its latest update, the company is reporting a pre-tax loss of £413m in the three months to June 30 from revenues of £2.9bn. However this was only down £18m on the same period in 2019 with £500m of cost cuts offsetting lower sales.
Due to lockdowns across its markets, retail sales in the quarter came in at 74,067 vehicles, down 42.4% year-on-year but improved month-by-month through the quarter with June down 24.9%.
JLR said its recovery in China and North America was “particularly encouraging”. Retail sales in China were down just 2.5% for the three-month period, while in North America they were up 2.2% year-on-year for the month of June.
About 98% of Jaguar Land Rover’s retailers worldwide are now fully or partially open and all the company’s plants have resumed production, with the exception of the Castle Bromwich facility in the West Midlands, which will gradually restart from August 10.
During the full-year results announcement in June, JLR emphasised that the Merseyside-produced Evoque and Discovery Sport models were key to its turnaround strategy. In the 12-month period, Evoque sales alone soared 24.7% year-on-year and the company has high hopes now for the “refreshed” Discovery Sport following its March launch in China.
For the remainder of the 2020/21 financial year, JLR says it will continue to manage costs and investment spending “rigorously” to maintain sufficient liquidity. With the cuts target now being raised to £2.5bn from £1.5bn for the year, total cost savings by March 2021 are likely to total £6bn.
Its report said: “Although the outlook remains very uncertain given COVID-19, Jaguar Land Rover expects a gradual increase in sales, profitability and cash flow over the year.
“In the second quarter, volumes may not recover sufficiently to generate a profit, but cash flow is forecast to be positive, supported by recovery in working capital as production resumes as well as continued improvements from Charge+ (its cuts programme).”
Chief executive Sir Ralf Speth added: “As the lockdowns ease, we will emerge from the pandemic with our most advanced product line-up yet, and with the financial and operating measures in place to return to long-term sustainable profit.”