Jaguar Land Rover: It's NOT a bail-out, we're running out of time, and the costs of inaction could be huge...

By David Bailey on Dec 28, 08 12:35 PM in Automotive

A number of arguments have been put forward over the last few weeks by those opposed to the government intervening to support Jaguar Land Rover. The Financial Times' Lex column pithily summed up the case against intervention; "it is hard to imagine a less deserving candidate. The luxury carmaker fails the public interest test on two key grounds. First, its products are of questionable social utility... The second reason... Mandelson should refuse to bail out JLR is that Tata Motors, the Indian company that paid $2.3bn for it, is capable of doing so itself, if it wishes".

Today The Times similarly dismisses the case for support, as did The Telegraph last week, which argued that "Jaguar must be allowed to fail".

In an attempt to set the record straight, I'd like to point out a few inadequacies in this line of argument:

De-bunking the Bailout Myth

This isn't a 'bail out' as many, including the FT, Telegraph and The Times, suggest. The $14 billion lifeline thrown to GM and Chrysler by President Bush is a bail-out, reflecting the fact that the Big Three in the US have deep-seated structural and strategic problems as well as having to face the double-whammy of credit crunch and recession (and the US auto industry has already had $25bn in loans to re-tool to produce environmentally friendly cars).

In very stark contrast, the underlying state of the British car industry is much better than in the US. After a wave of plant closures and the end of MG Rover in 2005, what's left of the industry here is both efficient and high quality. An otherwise efficient car industry in the UK is now collateral damage from the financial crisis which is increasingly engulfing the real economy. Credit, both for firms and customers, is hard to find. If you can't find the credit, you can't buy the car. Access to credit is necessary throughout the industry, and is needed by the supply chain and dealers as well as the manufacturers.

JLR itself made a £327 million operating profit in 2007 and £310 million operating profit in the first half of 2008. Since then conditions have deteriorated sharply and the firm has enacted 600 voluntary redundancies, cut-back 850 agency positions and brought in special sabbaticals on 80% pay for over 300 hundred staff. This is hardly an over-blown inefficient firm in need of a 'bail out'. Jaguar has also just reclaimed the global top-spot in the JD Power customer satisfaction survey.

Indeed, JLR and other manufacturers are not anyway asking for hand-outs, but rather loans or loan guarantees at commercial rates to enable them to get on with developing and making high quality cars. The argument is about access to finance and guarantees at commercial rates given that the (heavily state backed) banking system now seems unable to do the job properly. And the cast-list of people lining up to argue in favour of intervention on commercial terms includes very respected figures like Lord Bhattacharyya, head of the Warwick Manufacturing Group and CBI Director-General Richard Lambert.

Tata is already investing heavily in JLR

Tata is itself affected by the global down-turn which has impacted on many of the sectors it operates in (cars, steel, tourism...) and is also struggling to access credit itself given that wholesale markets have effectively dried up. Tata Motors has had to issue bonds aimed directly at the Indian public, paying 10-11%, in part to repay the $3-billion bridging loan that it took out to buy JLR. Tata is a socially responsible owner and has invested heavily in JLR since acquiring it earlier this year. The 'tens of millions' it is now putting in will help ease JLR's immediate cash problems (around £40 million in bills were reportedly due for payment yesterday, necessitating the Tata cash injection) but this doesn't get the government off the hook; intervention will still be needed in the New Year.

The Green Agenda

Whilst I disagree with the FT's generally anti-interventionist case, it was right at least in suggesting that the government should harness public funds to green the industry and to develop the green technologies of the future. Yet this is, in fact, exactly what JLR are doing in developing hybrid engines and lightweight composite materials, especially for the LRX concept car.

Indeed, JLR accounts for as much as 50% of all R&D (some £400m a year) spend in the UK auto industry, so if you really want to green the industry, the place to do it is by supporting JLR which is working with suppliers and universities to cut carbon emissions. It has an investment programme of around £800 million in environmental technologies that will provide key green technology jobs, and has recruited some 400 engineers this year to work on green technologies.

More generally, the UK auto industry is well positioned, with the potential to develop many of the key technologies that the industry will need in the future, such as electric fuel cells, hydrogen fuel (see the hydrogen cars whizzing around the University of Birmingham's campus), hybrid engines, and light-weight composite materials. JLR is central in this, and needs support to speed things up so that Britain can be Tata's environmental R&D base globally.

With both Tata (Indian) and Shanghai Auto (Chinese) now major investors in the West Midlands, there is a great potential for the UK to be the home for these and other firms' environmental R&D effort. But this will need a more pro-active industry policy targeting support to help develop such new technologies; this isn't 'picking winners' in the form of 1970s national champions but rather backing winners in the form of the new technologies of the future.

The Crown Jewels of the UK's car industry

JLR plays a strategic role in the UK car industry in the UK, supporting up to 15,000 jobs in its own business as well as at suppliers and dealers (60,000). It spends some £3bn a year on R&D and purchasing in the UK. Its R&D spend is ranked as the 7th largest R&D spend in the UK in any industry. Each year JLR also spends an additional £2.5 billion a year with suppliers and exports over £4 billion in products.

The Costs of Inaction could be Huge

Leaving aside the potential loss of the UK's green technological lead, the possibility of a complete JLR shut-down would anyway cost the government dearly. Remember that up to 75,000 workers depend directly or indirectly on the firm.

In a worse case scenario, factor in lost income for the exchequer (income tax, VAT, employer's and employees' national insurance contributions, corporation tax) and expenditures resulting from closure (unemployment benefits) and the total taxpayer 'hit' from a closure would be of the order of 30-40% of JLR's turnover. At a rough estimate, the latter was around £4.8 - £ 5 billion in 2007-2008. Follow, then, the logic of "allowing the firm to fail" could involve a net cost to the taxpayer of £1.4 billion to £2 billion. (And this ignores the costs of intervention to pick up the pieces - as much as £150 million was put aside for the Rover Task Force back in 2005, and MG Rover was a much smaller firm).

The alternative, a loan or loan guarantee, would in contrast be in the range of £500 million to £1 billion and would anyway be repaid at commercial rates within a year to 18 months. That seems like quite a good deal to the taxpayer and would have the added benefit of helping us to keep key green skills and jobs here in the UK.

Lord Mandelson is of course absolutely right to state that the government does not have an open cheque book, that Tata has first responsibility to invest in JLR, and that any assistance must meet strict tests. All of these of are critical points but do not obscure the simple fact that government intervention is both necessary and right. Temporary and targeted interventions will be needed to get strategically important firms and industries through this unprecedented situation.

To sum up, it's not a bail out, JLR is an efficient and successful firm developing many of the key green technologies of the future, Tata has and is investing heavily, and the costs of inaction could be huge. Lord Mandelson has said that the government is considering which strategic firms should be helped through the downturn. In the auto industry, JLR is about as strategic as it gets. Action will be needed early in the New Year.

Professor David Bailey is Director of the Birmingham Business School.

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34 Comments

Jo L. said:

A very well written and balanced article. Thankyou.
JLR is much more than just a car manufacturer and the sooner other media bodies take off their blinkers and look at the full picture regarding Tata's investment and JLR's great advances regarding green strategies before sounding off like typical ill informed fishwives, the better for all of us!

December 28, 2008 11:21 PM

RayCee said:

A big thank you to David Bentley. You have actually done your homework and come up with a reasonable assessment of the issue. I had given up hope of finding an article of the quality and soundness as this one.
I live in NZ but I'd worked out the whole argument about JLR and its receiving assistance was not being dealt with fairly in the UK press. What the average English journalist writes on this subject is utter drivel. No research or common sense, just sensationalistic scare-mongering. If only there were more journos out there of Mr Bentley's calibre.

December 29, 2008 12:19 AM

Patrick Baird said:

David Bentley says..."In very stark contrast, the underlying state of the British car industry is much better than in the US."

To exactly what does he refer when talking of 'the British car industry'? I may be wrong, but it's my impression that, other than a handful of extremely specialised small-scale sports car makers such as Lotus, we don't actually have a car manufacturing industry anymore.

Or have Ford, Toyota etc suddenly become British companies? I think not. I also think you'll find they remit their profits overseas. As will Tata, if they ever make any. And, if they hang in there, they will because, as we all know but somehow conveniently forget, recessions come and recessions go. That's a law of economic life.

Sadly, like so many things in the United Kingdom today, the 'British' element has long since gone. Today we're an over-populated island, vaguely connected to the EC, and a sort of third-world, offshore profit-maker for corporations based anywhere but Britain. Put simply, Britain Inc sold out a long time ago.

Anything that might have been remotely profitable or valuable, financially or socially, we sold. We sold the water, the electricity, the oil, the steel, the airports, the banks and just about every large, once-successful British company one can think of.

That includes every car manufacturing operation of any scale in the UK. Of course, the motor industry here was hardly a star performer. Since WW11 it has been hell-bent on self-destruction. Obtuse, incompetent, unimaginative management and an intransigent work force will do that to an industry. A point is reached where there's simply no point. None, whatever.

For a very long time there was no point in repeatedly poring public money into BMC/Leyland/MG Rover - other than to provide employment for the poor bloody craftsmen who tried valiantly to produce something they could be proud of. A battle they wouldn't win, given successive managements of such a low calibre.

Finally, the husk of MG Rover was given to some strange people with very odd financial ideas - and no ideas at all about making cars. Nor perhaps intention to ever do so.

The last chapter in that very sad story is being written in Mandarin now. Who knows, it could turn out to be a success. But it won't be a British success.

So, what's all this about putting money into the British car industry? There isn't one. It may have escaped the good Professor's notice that Tata is an entirely Indian-owned company. When a call centre in India gets into financial trouble, they don't generally get a bail-out from Her Majesty's Government. So why is Tata standing with it's hand out? It's a big and profitable concern. If it couldn't afford to properly fund the company it bought, perhaps it shouldn't have been allowed to buy it?

The people one feels sorry for in all this are the guys on the shop floor. They, and in many cases, their fathers before them, have a very great deal invested in Land-Rover and Jaguar. It's shameful that they will be the inevitable casualties if this latest phase of selling-the-family-silver produces its inevitable result - closure of the UK plants and relocation overseas. Mandy might just delay that process by pumping some small change into Tata's coffers. But probably not for long. And you can bet your boots, Mr T will be back before long for another handout.

There's one ironic little aside to all this. Closing the UK plants and relocating to India, or anywhere else, just won't work. A Jaguar or a Range Rover built in India won't catch the international buyer's eye. Believe it! For once 'branding' - the confidence trick of putting a designer name on cheap clothing made in sweatshops in low cost countries and selling the result at high prices - just doesn't work with certain products. Integrity, tradition and a host of other warm, fuzzy ideas are associated with Jaguar and Land Rover. They are British cars. The only place they can be made is Britain. And Mr Tata knows this.

So hang on to the purse strings, Mandy. You'll find that, amazingly, despite protestations and much tearing of (thinning) hair, Mr Tata will somehow scrape up the small change needed to keep his investments ticking over until better times return. Which they will.

December 29, 2008 2:20 AM

Keith Lane said:

Thank heavens for a well in formed man who knows what he is talking about , most of the uk press have not got a clue about the details of Jaguar Landrover and are just useing it as a political stick to hit goverment and peter Mandelson , this country will have nothing left except fast food outlets if this anti car stance persists , and this goverment should also take some blame for its anti car stance !

December 29, 2008 9:04 AM

Keith Lane said:

Thank heavens for a well informed man who knows what he is talking about , most of the uk press have not got a clue about the details of Jaguar Landrover and are just useing it as a political stick to hit goverment and peter Mandelson , this country will have nothing left except fast food outlets if this anti car stance persists , and this goverment should also take some blame for its anti car stance !

December 29, 2008 9:04 AM

David Bailey said:

Thanks for the comments - much appreiated. Patrick, I'd agree with you that we should do what we can to preserve and develop he domestic parts of our car industry, inclusing large chunks of the supply chain - such as GKN - that are in British hands. It is indeed unfortunate that we have no domestically owned mass manufacturer, but the key now is to ensure that manufacturing capacity remains in the UK and that Tata, BMW, Ford and Shanghai and others do as much R&D here as possible. Perhaps I should re-phrase some words in my blog not as the 'British car industry' but rather 'that part of th global car industry currently located in the UK'. That doesn't change my conclusion, though; JLR and other parts of the car industry here will need assistance in getting it through an unprecedented situation. This isn't a 'bail out' but rather is about the government stepping in t support a viable and important industry when the financial markets have failed.

December 29, 2008 11:42 AM

John Hemming MP said:

I am not involved in the detailed negotiations in respect of JLR. However, we do need to reocgnise that the financial system has become seized up. If the government does not act to lubricate the system then the damage caused by the failure will last for decades.

At the current exchange rates MG Rover would have been far more profitable. Much that I am critical of many of the actions of the Directors in the end the government allowed that to disappear by refusing a bridging loan of £100m.

Rebuilding these business entities is very difficult.

December 29, 2008 4:18 PM

Andy Hodges said:

It is, as many have said, a good article and adds to the debate. What needs to be emphasised to ministers is the need not to look at what is going to happen in the short term (at least short according to Mr Darling) but what will be left afterwards.

In the final paragraph of the article we are told “To sum up, it's not a bail out” and I agree, it’s an investment in the future for an area of the UK that could become one of the building blocks of a recovering economy if only someone has the foresight.

December 29, 2008 4:56 PM

Lisa De Propris said:

Given the disaster caused by the free market financial failure, I am surprised that anyone is still advocating a pure laissez faire approach. Leaving aside the intangible social costs of plant closure, Bailey has done the maths and the taxpayer would be better off through a strategic intervention to support JLR. Public funds should indeed now be used to make a strategic investment in the car industry so that when we see light at the end of the tunnel we are better poised to reap the dividends of growth.

December 29, 2008 7:44 PM

David Bailey said:

Thanks for your comments. John, yes you're absolutely right that the government needs to act to lubricate the financial system ASAP otherwise the damage done to the real economy (real jobs, real R&D, real exports) will be both considerable and long-term.

As Andy and Lisa also note, the investment in new technologies is key here; how can we compete in the industries of the future if we don't back them now?

December 29, 2008 9:11 PM

John Clancy said:

Professor Bailey is spot on, as usual. He has been so for the last 12 months on this blog and had the government been listening to him during that time we might have entered this recession with a better strategy to get us out sooner.

I would, again, return to my previous themes on this blog and emphasise the need to talk about investment, not lending. Lending got us into this mess in the first place. Oiling the credit market is clearly one aspect, but worthwhile, 'intervention investment', long-term into industry to recreate a new, greened British industrial manufacturing base we can all be proud of and benefit from is key to Britain's economic future.

And one which is regionalised to ensure the best sustainable economic output and growth for the entire nation, not driven by the needs and whims of the South East.

For the Midlands that has to involve the sustainable automotive industry, it cannot be simply allowed to disappear.

But I believe we can invest for a return which must involve an actual equity stake in those businesses we choose to inject large amounts of tax payers' money into, just like the banks. And that goes for any loan guarantee schemes etc. As has been said again and again here: there has to be a quo for the quid, a bang for our buck!

If Tata wants our money, part of JLR has to come with it: preference shares, please. We'll have some shares in Tata, if that's more palatable. Bite that steel bullet Tata. That will also mean that part of the foreign-owned 'British' car industry does actually return to British hands: yours and mine.

Perhaps we can then build on and build up that investment in the future to develop a more British-owned car industry based in the Midlands

We need to commit to a long term industrial strategy involving partnership between the private sector and targeted public involvement for a solid financial return by way of dividends on, and increase in value of publicly-owned shares.

The Private sector, it turns out after all, cannot survive by itself and now appears to recognise that it needs us (you and me) in order to survive and make any money at all. Some of us recognised this long ago. It's taken the grotesque chaos of private finance greed and incompetence (not, I hasten to add, the whole private sector) to teach us this lesson.

Whether we call it a bail out or not, we might as well go nearer the whole hog now: we'll invest directly to sustain important, stategic parts of our economy, even where initially owned abroad, but equity shares will ensure at least in part that... it's coming home, industry's coming home!

December 30, 2008 12:21 AM

John Ling said:

JLR contributes to our economy-whether the profits stay here or not-put a price on this....

At BXL we are privileged to run both of the Education partnership centres at the Jaguar and the Landrover sites. We work with schools from all over the UK in engaging thousands of young people and educators, stimulating interest in engineering careers and appreciation of the skills involved.

You thought it a blow when Longrbridge closed? JLR's closure would have a far more devestating effect on the region in particular, and the UK in general.

It's all about skills for when the upswing comes. Which it will. I learned my economic theories in the Thatcherite era, when I could never have imagined I'd be sat here suggesting government interference in the market. Oops. There goes a principle. But for the common good.

Come on. Gordon, get off that fence. But make sure you get something back in return...like a share in the company...

December 30, 2008 10:02 AM

John Ling said:

this time I've put my correct URL!! can't find out how to edit my post... :-)

December 30, 2008 11:10 AM

David Bailey said:

John, many thanks for this; a really vivid example of the very real dynamic costs of a JLR shutdown. Whilst I argued in the blog for commercial loans or guarantees, both yourself and John Clancy make a good case for longer term strategic investment and equity stakes to be taken in JLR by the government if need be. Thanks for contributing.

December 30, 2008 1:37 PM

DR said:

great blog and interesting comments. Bailey makes a strong case for government intervention on the grounds of the credit crunch and dysfunctional financial markets, the R&D efforts of JLR, Tata's investment, JLR's stratgeic importance and the costs of inaction. I'm not usually a fan of governments intervening but this hits all the buttons. IfJLR goes under I can't see much hope for manufacturing in the west midlands. This is cutting edge technology.Other governments intervene to support this; why can't the UK government?

December 31, 2008 3:52 PM

craggy said:

I hope Alistair Darling is reading all this. Presumably Mandy and Gordon have to convince him to open his purse up - again. There's of lots of ammo in Bailey's blog and the comments above to help them make the case. Lord Bhattacharyya's comments today in the Post were encouraging at least, but I hope the Post, Mail, other local news organs and Birmingham's MPs keep the pressure up. I've head Richard Burden make the case very well on radio, but haven't heard much from other MPs (although I saw Hemming's comments in response to Bailey's original blog). What do the other MPs make of all this?

December 31, 2008 4:28 PM

joseph kasule said:

Prof David,

Well written article especially drawing the difference between the US bail-out and the financing need with JLR. My one question though is, since we can all agree that JLR is efficient and simply needs the funding to carry on with production and probably become a green R&D role model, how will this translate into car sales (which is the actual issue considering that low sales are a result of consumer uncertainity and not the lack of new technology cars)?

That said, I do agree with the notion of the West Midlands becoming a technology and Research hub, whose research can be applied to other sectors.

Former student,
Joseph Kasule.

January 1, 2009 12:00 PM

David Bailey said:

Joseph, a nice surprise to hear from a distinguished alumnus of Birmingham! Yes, falling sales are a key part of the problems facing the car industry but this has two components with broader implications. One is the depth of the recession, with consumers postponing consumption decisions on big-ticket items like cars, especially at the luxury end. But the other is the credit crunch and how this makes consumers (as well as firms like JLR) unable to access credit in the usual way. The industry body SMMT is asking for a broader support package for the industry, with loan guarantees to lubricate the market for cars, so that normal credit can be made available again to buyers. That would underpin sales and prevent a crisis becoming a catastrophe.

But the credit crunch is affecting all parts of the industry, including suppliers, assemblers, and dealers. JLR are badly affected as they invest heavily in R&D and new technology – there is some strong evidence to suggest that in recessions it isn’t always the weakest firms that go under (a survival of the fittest argument) but perversely often those which are at the cutting edge of new technology and which have borrowed to invest. JLR falls into this category. The technologies it is developing are very much key for our collective future in reducing greenhouse emissions and developing sustainable cars.

Good to hear from you.

Dave

January 2, 2009 9:43 AM

Big Ron said:

Well done Prof. You've done us a service by setting out the important facts in an impartial way. There's one point you may have missed in relation to Jaguar Land Rover's strategic importance, and that's in relation to its production of Land Rovers which are used by the Armed Forces, police and rescue services. I couldn't imagine the US government letting such a firm fail if it produced key vehicles for the military and other state services. Isn't there a strategic defence argument here as well as the (well made) case you set out above regarding new technologies and the cost of inaction?

January 2, 2009 10:00 PM

David Bailey said:

Ron, thanks for contributing. A good point - quite how The Daily Telegraph squares their mistaken view that "Jaguar must be allowed to fail" with their quite correct and proper desire to see our boys serving in Afghanistan and Iraq equipped with the best (British) equipment is at the moment beyond me. Would they be happy with the MoD sourcing Land Rover replacements from, say, China?
Good to hear from you again.
Dave

January 3, 2009 9:38 AM

Unhappy Songs said:

Do I want all those thousands of people to lose their jobs? No. However, all the local news coverage demanding tax-payers cash refuses to look at a cold hard truth – JLR make products that are utterly pointless!

Aside from commercial/military applications, there’s no sane reason on earth why anybody needs a hulking great big 4x4 vehicle. Land Rover makes products with such a minute niche, farmers, people living in places where off-road capabilities are useful (that’s the proper countryside, not the kerbside in Dorridge), yet they’ve been foisting them on us as ‘luxury’ products. That’s bullsh*t – and they’re being found out now. As general modes of transport, they make no sense whatsoever.

As for Jaguar, well, what on earth is the massive premium they charge actually giving you? Not a lot. Ford/GM can knock out Mondeo’s and alike with build quality and toys previously only found in ‘luxury’ marques. Paying a massive premium for a badge and a bit of leather is insanity. And what does that badge actually mean? When I grew up, Jaguars were shoddy unreliable wrecks – and the Le Mans winning Silk Cut car was more a TWR engineering effort than anything.

Yes, Jag’s new models are stunningly gorgeous as artforms – but as a mode of transport, they’re irrelevant.

The days of paying over the odds for engineering that’s pointless (you can only drive at 70mph, you don’t need a huge motor), or brand values devised only to persuade you to part with more money than you really need, are over.

The world doesn’t need to pay JLR premiums to get from A to B reliably and comfortably.... the business plan is rotten. Sorry.

January 5, 2009 4:08 PM

David Bailey said:

Hi Unhappy Songs, thanks for taking the time to comment.

On purely commercial grounds, JLR actually made money last year and for the first half of this year, so the business model isn't really rotten.

You are right, though, that JLR needs to re-orientate towards greener and more fuel efficient cars, but as has been noted above, JLR is investing heavily in this area.

Jaguar's attempted foray into the mass end of the market with the x-type (based on a mondeo paltform) was indeed ill thought out -and the x type is unlikley to be replaced. Actually this is a shame, I think, as a joint product with Alfa (part of Fiat - a close partner with Tata) could develop a genuinely exciting x type replacement.

What is really hammering JLR is the credit crunch, and I repeat the point that this is NOT a bail-out; loans or loan guarantees would be offered by the government at commercial rates and becuase the financial system has imploded. The government would actually make money on this, for the benefit of the tax payer. It would also avoid huge costs for the taxpayer if JLR closed down.

Hope this helps.

January 5, 2009 10:04 PM

Unhappy Songs said:

Sorry David, you have glossed over my point - and possibly missed it totally. "Greener and more fuel efficient" won't solve anything - JLR produces 'premium' products where premium is increasingly irrelevant.
>
Any passenger vehicle is merely a mode of transport - the concept of luxury is a nonsense in days where mass producers make cars of high a standard in design, safety and reliability. Very few people 'need' 4x4 vehicles - and buying into them for status or marketing concepts of 'luxury' is and has always been loonacy.
>
Similarly with Jaguar - however fabulous they look, however marvelous the engine - as a means of transport, for getting around - there are much better value alternatives of equal quality. Buying for the badge is a frivilous activity - as people are displaying with their purchasing decisions.
>
Society will be changed by this economic crisis - it is only in a generation or two that we have been taken in by such silly concepts of 'luxury' and 'premium' consumerism, getting us to pay more for something than we really need to.
>
Someday very soon, Mondeo man will get out of his 3 series BMW and get back into a Mondeo (should Ford survive!). Premium is a nonsense when Ford can make a Mondeo of equal quality to so-called premium marques.
>
Your post sadly lacks a deeper, impartial analysis of the JLR product line against the likely changes in society post 2008. This isn't a recession...this is going to life as we know it.

January 5, 2009 11:29 PM

Unhappy Songs said:

January 5, 2009 11:30 PM

David Bailey said:

Hi Unhappy Songs
Well I agree that the mass car market will change dramatically, both in terms of how cars are propelled and how we 'own' them and use them. See Thomas Friedman at the New York Times recently:
http://www.nytimes.com/2008/12/10/opinion/10friedman.html?_r=1
And we may see less inequality of incomes after this financial crisis is over which may translate to less growth in demand for 'luxury' cars. However, that isn't guaranteed, and anyway there will always be people who want to differnetiate themselves by buying 'premium' or 'luxury' products, whether in the UK, Europe, US or the newly emerging economies of Brazil, Russia, India and China, where until very recently JLR was doing very well. Guess we'll just have to disagree on that one. Thanks again for commenting.

January 6, 2009 9:28 PM

Steve Cooper said:

David, i must say a well informed written article, just a quick reply to unhappy chappies comments. There always has been and always will be a market for cars like JLRs range of cars, and regarding them being pointless, how do you work that out? maybe in your opinion they are pointless but people were still buying them before the world markets collapsed,no one at this time can get credit,no one is selling cars, Fords,GM,BMW,Audi and Mercedes are all in the same boat as JLR,they are also a lot bigger than JLR and there profits were bigger so they have there cash reserves to fall back on, JLR was in a transition period when the markets went haywire, that is not JLRs fault or the marvelous workforce they have, mind you i suppose its ok to give the banks billions of taxpayers money so they can pay there bonuses out and then sit on the taxpayers money they have in the banks, but hey, thats a different story isnt it. Scoop ;)

January 8, 2009 9:34 PM

David Bailey said:

Just been looking at JLR accounts... I reckon that amount of tax and NI paid by JLR employees is over £200m and the VAT on sales is over a billion (say £1.1bn). That alone brings in £1.3bn a year to the govt's coffers. Add in tax and NI paid be employees in the supply chain and you can see that JLR and supported companies raise a lot of cash for the government each year! A £1bn loan or loan guarantee, with a loan repaid at commercial rates within two years would actually be good value for money for the government and better than large scale job losses. The latter would also mean the government having to fork out in unemployment and other benefits.

January 12, 2009 10:27 PM

David Bailey said:

This is the first time I've seen a supportive statement in the national press - "Companies such as Jaguar Land Rover aren't lame ducks, but healthy ducks throttled by the credit squeeze" - see Seumus Milne in The Guardian today:
http://www.guardian.co.uk/commentisfree/2009/jan/15/unemployment-recession-business-jobs
Maybe someone is listening?

January 15, 2009 1:25 PM

DR said:

The US have 'bailed out' two US firms - GM and Chrysler - to the tune of 17 billion dollars. Sweden has intervened. France provided credit guaranteed to the financing arms of Renault and Peugeot to the tune of nearly 800 million euros last December. They has also asked for 'firm undertakings' by manufacturers not to shift production or sourcing overseas.
Why are we still waiting here in Britain? We're not even talking about a bail out here.
As Bailley says the car idnustry is "collateral damage from the financial crisis which is increasingly engulfing the real economy". I understand the need to make sure Tata invests as muich as it can, but they are also affected by the credit crunch.

January 18, 2009 11:32 AM

David Bailey said:

Yes, you're correct on the French figures. Sarkozy has also ordered a review of the French car industry last December. The idea is to restructure the French industry, aiming to increase market share and exports. Any further financial package will be linked to supply chain restructuring.
All we're asking for here in the UK is commercial loands of loan guarantees, plus credit guarantees to shore up the market. We're not looking for a French style industrial policy.
The clock is ticking and job losses are stacking up.

January 18, 2009 12:04 PM

James Cook said:

I did not have a problem with Rover "going" as there products were, quite frankly embarrassing. Jaguar and Land Rover are different, they have recovered from the dark years of an apathetic communist BL with investment and know-how from, BMW and Ford to create a world class product line. Well considered, well engineered and well designed living up to the brand promise, TATA as far as I can see will continue this good effort. The recession will end and Jaguar LR will emerge in a good position — they just need some help for a couple of years. I think it would be a prudent long term investment, considering how much corporation tax, NI and VAT this organisation generates, never mind the social and economic costs if this company was allowed to fail.

January 20, 2009 9:11 AM

mike barker said:

The best piece I've read on the current crisis and jag. Well done.

January 31, 2009 8:16 PM

David Bailey said:

James, a very good point. In the short-run, a JLR closure would cost huge amounts in foregone income tax, NI and VAT especially given the very long supply chain it supports. Longer term, it is a key compnay for R&D and developing key new green technologies. And remember that today Rolls Royce aero engines is a fantastic British success story and has a huge benefit to Derby. The firm survived because of temporary nationalisation in the 1970s. We're not calling for nationalisation but rather a sensible and time-limited package of support to protect jobs, skills and firms which are viable longer term. Thanks for your comment.

February 1, 2009 6:06 PM

Jag Ed said:

Jag now seem to be in discussion with unions over cutting costs... more job cuts may come anyway. Any news on discussions with the government

February 15, 2009 9:05 PM