GARY PUSEY
“A hard brexit could cost JLR £1.2 billion per year and destroy research and development”
IAM trying to make up my mind whether I should be worried or not. Worried about what, I hear you ask? Well, about JLR. I wrote a while back about its first quarter financial losses. To remind you, JLR suffered a pre-tax loss of £264 m in the three months to end-june 2018, which company boss Prof. Dr. Ralf Speth put down to a slowdown in sales in China, the apparent end of Europe’s love affair with the diesel, and the ongoing uncertainty over Brexit. When the company released its Land Rover sales figures for the seven months from January to July, they showed sales down by 2.2 per cent on the same period in 2017. A month later, the January to August figures revealed sales down by almost 3 per cent compared with the same period last year. But now it’s developing into a veritable tsunami of bad news.
As this month’s issue went to press, the January to September figures show a massive worsening of the position, down 5.2 per cent on the equivalent nine months in 2017. Jaguar sales have not declined by anywhere near the same amount, but nevertheless the combined sales total is down by 4 per cent on 2017.
In early September came the government’s Zero Emission Vehicle Summit, held in Birmingham. Prof. Dr. Speth was one of the invited speakers and he took the opportunity to make his concerns very public and very clear. Speaking immediately before the Prime Minister herself addressed the conference, Speth talked about JLR’S massive investment in electric vehicles and stressed that JLR was “firmly committed” to the UK. But he also talked about Brexit, and I think what he said should make us all sit up and listen.
If the right Brexit deal isn’t agreed by March 29 next year he said that he “didn’t know if any UK JLR manufacturing facilities would be able to function on March 30”. He pointed out that JLR builds 3000 cars per day using 25 million components and all of these are delivered to his factories on a just-in-time basis. If these supply chains are disrupted as a result of a bad Brexit deal, he said, it could cost JLR £60 million a day. Frictionless trade is a “fundamental necessity” and access to the single market “is as important to JLR as wheels are to a car”. Underlining the company’s decision to shift Discovery production to the all-new plant in Slovakia, he stressed that it is “already cheaper to make cars in Eastern Europe but Brexit may mean that JLR can’t physically build cars on time and on budget in the UK”. He reckoned that a hard Brexit could cost the company £1.2 billion per year and destroy research and development. Rather ominously, he said the company is “already having to take decisions that cannot be reversed, whatever the Brexit outcome, just to survive”.
He also took the opportunity to point out that JLR’S latest diesel vehicles are among the cleanest cars ever made, and yet uncertainty over diesel has caused buyers to defer their purchasing decisions, and he linked this directly to the reduction in JLR’S workforce by 1000 people earlier this year.
Everything he said at the conference was consistent with what he has said in the past, but it seems he feels that the government isn’t listening, a view that is likely to have been reinforced when the Prime Minister followed him on stage and said nothing that would have addressed his comments and concerns, or even have indicated that she had heard what he had said.
Speth’s comments made headline news, but a few days later MP Sir Bernard Jenkin, a hardline Brexiteer, said of his comments: “I’m afraid I think he is making it up” and accused Speth of scaremongering. Whatever your views of Brexit, either hard, soft, or not at all, it is difficult to imagine why the CEO of a business the size and importance of JLR would stick his head above the parapet in such a way, unless he believed that what he had to say was fundamental to the future of his manufacturing operations in the UK, and indeed to the very survival of his business.
The reality is that the slightest disruption to JLR’S supply chains will spell disaster. Every one of those 25 million components is fundamental to vehicles rolling off the lines, and if the right part isn’t there when it’s needed, then the production line grinds to a halt. Speth has rightly pointed out in the past that the government needs to work closely with the UK’S automotive industry, which employs over 800,000 people, but it seems that he believes the government is playing fast-and-loose with the future of one of the country’s biggest industries.
Within days, JLR had announced that it was placing the workforce at its Castle Bromwich factory on a three- day week until Christmas. And then in early October came the news that the Solihull factory would close for two weeks at the end of the month, due to ‘weakening global demand’.
I’ve made up my mind. I am worried for JLR’S future and regardless of your personal views in terms of in or out, it’s difficult not to sympathise with Speth and join him in wishing that politicians in the UK and the EU would stop playing poker – or perhaps playing chicken would be a better way to describe it – when the situation is nearing meltdown.
Gary Pusey is co-author of Range Rover The First Fifty, trustee of The Dunsfold Collection and a lifelong Land Rover enthusiast. What this man doesn’t know, isn’t worth knowing!