The UK government has ruled out a financial bailout for Jaguar Land Rover (JLR) as the Tata-owned carmaker prepares to cut jobs and reduce costs amid weak sales, higher expenses and growing competition from Chinese carmakers. JLR is expected to cut around 4,000 jobs over the next two years, according to a Times report.
The proposed cuts are part of a wider restructuring plan aimed at making the company more competitive as it faces pressure in key markets.
JLR has started a voluntary redundancy programme as it looks to save around $2.3 billion over the next two years. The company has not said how many employees could be affected by the programme.
The carmaker is also aiming to lower its break-even point to around 300,000 vehicles. As part of the restructuring, it plans to simplify its operations and adjust its business to changing market conditions.
UK Business Secretary Jonathan Reynolds said the government would not intervene in the running of JLR or stop the company from restructuring its workforce, when asked by BBC.
Reynolds has spoken with JLR’s chief executive and the general secretary of Unite and is expected to meet them early this week. The government has said it wants to limit job losses while allowing the company to take steps needed to remain competitive.
JLR’s restructuring comes at a difficult time for Europe’s car industry. Chinese manufacturers such as BYD and Chery are expanding their presence with lower-priced electric and hybrid vehicles, putting pressure on established European brands.
Several major carmakers are also cutting costs. Volkswagen recently received approval for a plan that could result in a further 50,000 job reductions.
JLR is also looking to strengthen its position in the US, which is its biggest market. The company has been working to expand its operations there as it reviews the role of its UK manufacturing base.
JLR employs around 33,000 people in the UK and about 40,000 worldwide. The company is owned by Tata Motors Passenger Vehicles Ltd.
Its revenue fell nearly 10% in its latest quarter, while pre-tax profit dropped 69% to 109 million pounds.
The company has faced several operational setbacks in recent years, including flooding at a key supplier and a cyberattack that stopped production at its plants around the world. The disruption also hit its supply chain, leading the UK government to guarantee a 1.5 billion pound emergency loan to help JLR pay suppliers.
JLR is meanwhile pushing ahead with its electric vehicle plans. Its first electric Range Rover went on sale earlier this month for 154,070 pounds, making it one of the most expensive electric SUVs in the market.
The high price also shows the challenge facing premium European carmakers as cheaper electric and hybrid SUVs from Chinese manufacturers become more common in the UK.