The Hindu Business Line : JLR supply chain will collapse without bailout

Oiling the Wheel
At least 200,000 jobs are at stake.
The UK government has no option but to grant a loan to JLR.
Land Rover has been emerging a “big question mark”.

Murali Gopalan

Mumbai, Dec. 23 Any delay in bailing out Jaguar Land Rover (JLR) would be “catastrophic” for the entire supply chain associated with the car company, say top sources in the UK familiar with the development.

In fact, it is estimated that at least 200,000 jobs are at stake should operations come to a grinding halt for want of money. These include the estimated 15,000-and-odd employees at JLR and an additional workforce that is “at least ten times more” encompassing the technology centre, component makers, logistics providers, dealers etc.

“The UK government has no option but to grant a loan to JLR on the lines of its counterpart in the US which is pulling out all stops to rescue General Motors and Chrysler,” they add.

Since the critical supply chain for JLR is largely located in the Midlands, this becomes a sensitive issue from the viewpoint of workers’ votes. “They will not take it lying down if the government is perceived to be indifferent to their cause,” sources said.

Incidentally, it is precisely for the fear of massive layoffs that the US is treading cautiously with GM and Chrysler. “You are talking of really big worker numbers here in addition to bankers, suppliers and dealers who will be left in the lurch,” they added.

There have recent reports in the British press which suggest that the Tatas are planning to inject “tens of millions of pounds” into JLR but this may not be necessary once the government steps into the picture and extends the one billion pound loan. The Indian company will clearly look for its own avenues to raise cash but would ideally like to minimise its debt exposure.

As in the case of GM and Chrysler, the road ahead for JLR is going to be rough during this slowdown, says British automotive journalist, Mr William Kimberley. “However, I still believe that these brands, especially, Jaguar, can hold their own once this difficult phase is complete,” he told Business Line.

Tatas had bought out JLR from Ford for £2.3 billion and even though a section of industry experts insisted that the acquisition cost was “prohibitive”, the general feeling was that the house could be put in order. That is when the financial collapse occurred in the US and it has been a series of bad news since resulting in the worst global slowdown for decades.

“Jaguar has a good fit with the Tatas and I see a lot of benefits accruing especially from the viewpoint of the advanced diesel engine programme,” Mr Kimberley said. In his view the brand has the potential to ramp up volumes in strategic markets on the lines of Audi and Mercedes but this may take sometime in coming.

Land Rover, in contrast, has been emerging a “big question mark” of late. This is because the Range Rover is an iconic brand which is perceived to be more of a limousine. “The challenge for Land Rover is to go back to its roots and develop low-cost, utilitarian vehicles,” Mr Kimberley added. It is here again that the Tatas are “perfectly equipped” to contribute to the rebuilding process.

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