18 November 2009

Tata's Direction For Jaguar/Land Rover

When JLR were part of Ford, they had much they could share with the Ford group of companies that kept costs down. The bad part was that things didn't happen quickly with Ford and that JLR had to wait too long for approval to do things. Now Tata is allowing decisions to happen quicker. Unfortunately, JLR have lost access to cost savings of sharing within Ford. So there are plus and minus points for the company.
One thing that is certain is that costs must be reduced. By doing so, JLR can achieve its break even point profit wise with fewer sales. How to do that is a problem, as this I think involves moving some production away from the UK and closing at least one of its three UK factories.

For example, the Defender sells about 25,000 units per year, is a basic vehicle and is quite expensive to make in the UK. If production was moved to India, it would be cheaper to make and therefore have economic benefits. Another option involves the Jaguar X-Type. It is just being phased out of production in the UK. If the tooling was moved to India, the car could then be made for emerging markets and even some like Australia that really do still sell the car in reasonable numbers. Oh, of course the unions would protest and the doomsday howlers regarding UK industry would say it's the tip of the iceberg. Soon, the whole JLR company will be in India. That would be a stupid thing to do as many people buy JLR because they are British. The majority of production must stay in the UK, but the examples I mentioned could go to India without affecting UK manufacturing much at all. It would get JLR back in the black sooner and protect British jobs.

The bottom line: Tata needs to close a UK factory and move Defender and/or X-Type production (or its successor) to India to give JLR a more profitable future.

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