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Chinese market slump and diesel crisis 'led to JLR cuts' – not just Brexit

Joseph Flaig

A slump in the Chinese market, falling diesel sales and other factors have combined to create something approaching a “perfect storm” for Jaguar Land Rover, an expert has said.

Brexit alone cannot be held responsible for the announcement of 4,500 UK and global job cuts at the luxury car manufacturer, said industrial engineer and University of Oxford professor Matthias Holweg. The cuts follow 1,500 workers leaving the company in 2018.

On a day when Ford also announced plans to cut thousands of workers, Saïd Business School’s Holweg told Professional Engineering that it is “too simplistic to say Brexit is responsible for the JLR job cuts”.

JLR's worldwide sales fell by almost 50,000 in the year up to November, including a 50% drop in China amid the first slump since the country’s market began growing rapidly in 1992. “It has been a really significant problem, not just for JLR but everyone else too,” said Holweg.

Closer to home for the UK’s largest vehicle manufacturer is the diesel sales “crisis”, which has seen consumers turn away from the fuel over environmental health concerns and increasingly stringent regulations. In April 2018, diesel models reportedly made up about 90% of JLR’s sales in the UK.

“If you have an SUV and you want to drive in city traffic, you need a lot of torque to move,” said Holweg. “Diesel engines produce torque and they are quite economical in terms of fuel consumption. The problem that comes is particulate emissions and NOx, and that is of course where the diesel ban links up. Customers across Europe have been less eager to buy diesel vehicles.”

On top of the diesel issue and the global slowdown in sales is the uncertainty created among buyers by Brexit and other political chaos. “In times of uncertainty, customers are more likely to postpone purchases,” said Holweg.

The cuts at JLR are part of a “transformation programme” aimed at reducing costs by £2.5bn. The plans for a “leaner, more resilient organisation” will begin with voluntary redundancies in the UK and include plans for a “flatter management structure” – fewer middle managers between staff and executives.

“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,” said Dr Ralf Speth, JLR's CEO.

The company will increase investment in electrification, with a new battery assembly centre at Hams Hall in Warwickshire and electric drive units to be produced at Wolverhampton Engine Manufacturing Centre.

In its official announcement of the cuts, which were heavily trailed throughout the morning, the firm highlighted its global expansion. In 2018, it opened a factory in Slovakia and invested in “specialist engineering hubs” in Ireland and Hungary.

The next few years will likely see increased overseas production, said Holweg, particularly with any barriers to trade post-Brexit. The company is also likely to move production closer to where cars are being bought, he added.

Content published by Professional Engineering does not necessarily represent the views of the Institution of Mechanical Engineers.


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