Jaguar Land Rover is set up well for growth and prosperity, says Howard Wheeldon.
Jaguar Land Rover – Flying Long Term Investment Flag With Pride
With good news in short supply these days it is great to report that Jaguar Land Rover (JLR) has finally secured a new agreement with its workforce which allows it to retain all three plants – Solihull, Castle Bromwich and Halewood. What’s more, as a direct result of this agreement, we understand that parent company Tata has now committed to a multi billion pound investment in the JLR business. This is expected over the next ten years to lead to significant expansion of the workforce.
Jaguar Land Rover has come a very long way since the company was acquired from Ford Motors by the Indian owned Tata Group. One could well conclude that Tata chose just about the worst time (January 2008) to acquire JLR. Recession was well under way but unbeknown to most, it was about to get much worse, especially for the automotive industry. Then came the funding issue in which the then British government appeared to all but wash its hands to a request to provide guarantee support on already agreed loans from the European Bank.
Thankfully though, Tata found other ways of skinning the cat and JLR has subsequently gone from strength to strength.
JLR sales in September were up 16% to 19,528 units and cumulative product sales up by 40% for the first nine months of the year to 112,287 units. The company has recently enjoyed one of the best quarterly profit periods in its history. Few can doubt that the company is now at long last doing very well. It’s worth noting too that Land Rover sales had, by the end of the quarter ended September, outsold the number of those sold throughout the whole of 2009. At Halewood the company intend to hire more staff to support the upcoming production launch of the Range Rover Evoque. Other models are also in the pipeline and there is a commitment today for more new models to come under what is termed an ambitious plan that looks for volume growth. And just last month at the Paris Motor Show the 200mph electrical powered concept supercar codenamed C-X75 absolutely stole the show. JLR isn’t short of ideas and under Tata it has a parent group that is prepared to invest in the future.
Set free of its Ford chains, the prospects for JLR now that the workforce is fully on side are in my view excellent. Of course, the currency angle remains as important as it always was for a company that is heavily export orientated. For now though currencies are not a particular burden and we doubt they will be at any time over the next year. By then, despite if global growth slows down as expected, we suspect that JLR has ample opportunity to continue growing market share, albeit in a market arena that remains full of uncertainty. Make no mistake about it, this is a well managed operation that has a well placed future strategy to match. To achieve the new found goals will require new investment particularly at Meteor Works, Solihull and it may well be that ultimately Castle Bromwich will need to expand.
Success stories in Britain are all too rare these outside aerospace, defence, pharmaceuticals and within the multitude of small and medium sized enterprises that make the economy tick. We are good at gluing things together in the UK using imported parts and particularly in the automotive industry. Jaguar Land Rover, though, is one of those rare if not almost unique beasts that still makes large scale use of a UK sales chain. With a unified and committed workforce working alongside a new management it really does seem that the thirty year dream that past management has had of conquering the world might at last be on its way to being achieved.
Howard Wheeldon is the Senior Strategist at BGC Partners