Why is Jaguar Land Rover cutting 4,500 jobs?

The UK’s largest automotive manufacturer has announced that it is cutting around 4,500 jobs – the majority coming from its 44,000-strong UK workforce, with back office rather than production roles hit hardest.

Jaguar land Rover is to open a new software centre in Ireland - image courtesy of JKR.
UK automotive manufacturers are facing the SMMT has called a ‘perfect storm’ – image courtesy of Jaguar Land Rover.

As well as further details on the job losses, today’s announcement included details of sales for 2018, the business outlook for this year, an update on cost savings and planned investment in UK plants.

The layoffs are part of a cost-cutting – ‘Charge and Accelerate’ – programme Jaguar Land Rover has implemented – put together by Boston Consulting Group – in the wake of a what the SMMT has called a ‘perfect storm’ facing UK automotive manufacturers.

Jaguar Land Rover’s £2.5bn cost-cutting plan has already seen the Tata-owned conglomerate cut 1,000 temporary contract workers at its plant in Solihull in 2018, 180 agency staff at its Halewood site, and 1,000 Castle Bromwich workers were put on a three-day week for the last three months of 2018.

This latest round of job losses focuses mainly on management, marketing and administrative roles, with voluntary redundancies being offered where appropriate.

Chief executive of Jaguar Land Rover, Dr Ralf Speth stated: “We are taking decisive action to help deliver long-term growth, in the face of multiple geopolitical and regulatory disruptions, as well as technology challenges facing the automotive industry.

“The ‘Charge and Accelerate’ programme combines efficiency measures with targeted investment, safeguarding our future and ensuring that we maximise the opportunities created by growing demand for Autonomous, Connected, Electric and Shared technologies.”

So far, the ‘Charge and Accelerate’ programme has reportedly identified more than £1bn of improvements, with more than £500mn already realised in 2018. The savings and improvements achieved are hoped to enable Jaguar Land Rover to fund investments into technology to safeguard its long-term future.

So far, the ‘Charge and Accelerate’ programme has reportedly identified more than £1bn of improvements - image courtesy of Jaguar Land Rover.
So far, the ‘Charge and Accelerate’ programme has reportedly identified more than £1bn of improvements – image courtesy of Jaguar Land Rover.

These investments include an announcement today that, from later this year, next-generation Electric Drive Units (EDU) will be produced at the company’s Engine Manufacturing Centre in Wolverhampton. These EDUs will be powered by batteries assembled at a new Jaguar Land Rover Battery Assembly Centre located at Hams Hall (North Warwickshire), “reinforcing the company’s commitment to the West Midlands and the UK”.

‘Perfect storm’

Automotive manufacturers have been hit by a number of factors of late: a decline in consumer confidence leading to falling sales of ‘big ticket’ items like new cars; ongoing uncertainty around how diesel vehicles will be taxed and treated; questions over the UK’s competitiveness post-Brexit, and a downturn in Chinese sales.

Diesel

Given that 90% of its output is diesel-powered, Jaguar Land Rover is particularly exposed to continued anti-diesel policies such as a hike in related vehicle excise duty and increased clean air zone fines.

Diesel car registrations in the UK have fallen sharply over the past 18 months as a result, down almost 30% in 2018, with the decline not showing any signs of levelling out in the months ahead. This is despite new emissions tests showing diesel engines “deliver in the real world”, according to the automotive trade body, SMMT.

“Diesels are, on average, 15-20% more efficient than petrol equivalents and so have a substantial role to play in addressing climate change. The hard-won gains made by the sector since CO2 records began in 1997 are being undermined by the shift away from diesel and disappointing growth in alternatively fuelled vehicles,” the trade association has previously warned.

The British automotive giant, will sell original E-Types that have been restored and converted to run on battery power - image courtesy of JLR.
Production will commence on an electric E-Type Zero model, following a one-off concept version unveiled in 2017 – image courtesy of Jaguar Land Rover.

Jaguar Land Rover has announced that from 2020,  all new vehicles manufactured will be electrified, with a portfolio of electrified products across the model range encompassing fully electric, plug-in hybrid and mild hybrid vehicles.

China

In December 2018, Jaguar Land Rover’s chief commercial officer, Felix Brautigam described conditions in the Chinese market as “challenging”, with sales down 50.7% year-on-year. Brautigam cited July’s changes in import tariffs and intensifying competition on price, adding that “ongoing global negotiations on potential trade agreements have dampened purchase considerations”.

The BBC has also reported that the relationship between Jaguar Land Rover and its Chinese sales network has been “strained”, following dealers’ demands for “better terms and promotional incentives”.

Europe

In October 2018, Jaguar Land Rover opened its brand-new, €1.4bn manufacturing facility in Nitra, Slovakia – making it the first UK automotive company to open a plant in the country.

The move follows the opening of its Chinese joint venture in 2014 and Brazilian plant in 2016, supported by contract manufacturing in India from 2011 and Austria from 2017.

The Slovakian plant has an annual capacity of 150,000 vehicles, and the first Land Rover Discovery rolled off its production line in September. The site already employs 1,500 people, with the business reportedly planning on hiring a further 1,500 in the coming months.

Europe is home to the largest number of Jaguar Land Rover retailers with almost 800 outlets across more than 40 countries. Since the beginning of 2018, the business has sold more than 94,000 vehicles in Europe.

Around 1,000 agency staff are to be told they are no longer required at JLR plant in Solihull, - image courtesy of Depositphotos.
Europe is home to the largest number of Jaguar Land Rover retailers with almost 800 outlets – image courtesy of Depositphotos.

Unions are likely eager to hear whether Jaguar Land Rover’s expanding global production footprint will continue to benefit from additional investment at the expense of the UK.

No-Deal Brexit

This week, businesses, trade groups and politicians stepped up their efforts to avoid a potential ‘No-Deal’ Brexit, which would see the UK leave the European Union on 29 March without a trade deal.

EEF has reported that more and more of its members have begun stockpiling raw materials and finished goods over fears that import and/or export prices may rise.

The trade association also delivered a joint statement alongside the CBI, the British Chambers of Commerce, the Institute of Directors and the Federation of Small Businesses which warned against a so-called ‘managed’ No-Deal Brexit.

The chief executive of the SMMT, Mike Hawes, has urged: “We’re facing Brexit, we’re facing leaving the EU. We don’t know under what terms. We desperately need a deal – to have no deal for [the UK’s automotive] industry would be catastrophic.”

Brexit contingency planning has affected every business sector, although according to the Confederation of British Industry (CBI), only around 20% of British businesses have implemented a strategy for this outcome.

Dr Jonathan Owens, an expert in supply chains at the University of Salford Business School, noted: “It is evident [that Jaguar Land Rover] are making big financial investments; they have appointed Boston Consulting Group to put together the turnaround plan, and technology upgrades to meet its low-carbon commitments.

“Also, the company has revealed they will to transfer all production of its Land Rover Discovery model from the West Midlands to a plant in Slovakia by the end of this year and perhaps more production there in the short term, while they develop and implement EV production lines in the Midlands.

“So ,perhaps a significant question is: are they moving quickly enough for their traditional market? It appears evident the company has been slow in getting into hybrids and now they have to speed up getting fully into electric vehicles, especially if they want a piece of the EV market and not be so over reliant on one market.”