Soured Tata’s commitment to JLR seen as strong as ever

Aug 25 2009 by Alun Thorne, Birmingham Post

JLR employs 15,000 people in the UK and spends £400 million a year on research and development, half the automotive industry total. It exports 80 per cent of its production – to 160 countries.

It has a £7 billion turnover, about the same as Marks & Spencer.

It was spending £800 million on environmental innovation. It had 300 suppliers, and spent £2.5 billion a year with those in the UK.

That meant directly and indirectly some 75,000 jobs were dependent on JLR.

For months Tata was desperate for a deal with the Government but, as negotiations dragged on, it finally saw some light at the end of the tunnel.

Tata Motors posted a better-than-expected £65 million profit for the three months April to June, up 58 per cent.

And then came signs that international lending was freeing up.

That led to the deal with the banks on working capital while the EIB agreement should follow suit.

Meanwhile, consultants have been called in to stem the losses – Tata revealed pre-tax losses for Jaguar and Land Rover combined of nearly £350 million in 2008 compared with a pre-tax profit for the two marques of £660.5 million in 2007. JLR incurred a loss of £281 million in the ten months to March.

KPMG and Roland Berger Strategy Consultants are advising on cost-cutting and cash management.

It takes place as Tata is taking a more proactive role with JLR and a tighter hold on its finances.

At the height of its frustration with the Government, Tata hinted at temporary plant closures, with Halewood the likely target, if things failed to come together rather than its Castle Bromwich and Solihull operations.

No-one knows what conclusion the consultants will come to but it is thought the lending deal makes it less likely that a factory could go.

Nevertheless, after such a traumatic period, Tata is clearly committed to sorting out JLR and lowering its breakeven level.

Whether its long-term plans do envisage a three-plant strategy or only two remains the next great controversy.