Jaguar Land Rover Finds Secret Ingredients To Staying Alive

Industry News

Thank China and a massive cost-cutting effort.

It’s not often that posting a loss is good news, but when you’re talking about a company in as much financial trouble as Jaguar Land Rover is in, then that's sometimes the case. JLR's saving grace comes from the fact that it ended the fourth quarter of its financial year (January-March for JLR) with £120 million ($153 million at today's rates) in pretax profits despite suffering a £3.6 billion ($4.58 billion) loss for the total year.

That’s a good sign that the British automaker is back on track towards being profitable. It's just the type of news the company needed considering it had such a bad 2018 that it announced a major $3.15 billion cost-cutting plan that involved axing 4,500 jobs and slimming down expenses anywhere it could.

JLR’s problems can be traced back to a huge drop in demand from China - which offset gains the company made in the US and UK - as well as to a downtrend in the popularity of diesel models, a $4 billion write-down of the company’s assets, and to trade threats related to Brexit. The company’s CEO, Ralf Speth, voiced his frustrations at JLR’s misfortunes, saying, "Jaguar Land Rover has been one of the first companies in its sector to address the multiple headwinds simultaneously sweeping the automotive industry. We are taking concerted action to reduce complexity and to transform our business through cost and cash flow improvements.”

Aside from the culprits the company lists as causes of its poor finances, the argument can be made that JLR also suffered from having too few SUVs and too many sedans in its Jaguar brand - just as SUV demand was spiking - and from quality control issues that may have sent buyers to other luxury brands.

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The automaker hasn’t commented on how it plans to fix the latter two issues, but it has affirmed that it will stick with current powertrain technology and not stray away from forming partnerships focused on electric powertrain research in order to stay small and reduce wasteful spending. JLR then plans to take advantage of the flexibility its size offers to try and grow its autonomous and shared mobility businesses.

For the time being, JLR can credit its aggressive cost-cutting measures and stabilizing sales in China for the current string of good luck. "Metrics (in China) have started stabilizing, return on sales have picked up dramatically and at the same time our inventories at the dealers have come down significantly,” said P.B. Balaji, Chief Financial Officer of JLR’s parent company Tata Motors to Reuters. "We should start seeing China come back to growth a quarter from now,” he added.

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