Saturday, February 28, 2009

Chinese balm for JLR

S KALYANA RAMANATHAN / London March 1, 2009,

Gets orders worth $850 million spread over 3 years.

Jaguar and Land Rover (JLR), owned by the Tata group, have received a massive boost from China in the form of an order for 13,000 cars, worth £600 million ($850 million, Rs 4,400 crore), to be delivered over the next three years. The order is part of the business secured by a UK industries from a Chinese trade delegation that visited the country a few days ago.

“This is a very significant order, underlines the importance of the Chinese market and the commitment of our partner. Sales of our vehicles in China have been growing rapidly over recent years and it is now our fifth-largest market in the world,” a JLR spokesperson said. “The confirmation provides us with a solid base on which to further build our presence in this key emerging market and is particularly welcomed at this challenging time for us and the automotive industry.”

Sources in the UK automotive industry further said that the order from China is for 10,000 Land Rovers and 3,000 Jaguars. The value of the order is a little more than half what the Tata Group paid (£1.15 billion) for the two iconic nameplates last year.

This development should come as a morale booster for the two brands at a time when the global automotive industry is faced with shrinking sales, making plant closures and retrenchments a common practice. In 2008, Land Rover had witnessed a 17 per cent fall in sales, while Jaguar improved its sales by 8 per cent.

JLR is at present implementing the tail-end of a cost-cutting exercise that will let go of 450 workers, taking the total job losses in the group to 2,000 over the past few months. Some 12,000 workers at the two companies, spread over six sites, are at present voting for a no-job-loss deal with the management that will involve a pay-freeze and reduced working hours for the next two years resulting in savings of £70 million (Rs 510 crore) annually for the company. The result of this ballot will be formally announced on March 6.

In January, according to industry estimates, car production in UK fell 58.7 per cent to 61,404 units, while production of commercial vehicles fell nearly 60 per cent to 8,351 units. Last month, the UK government had announced a plan to help the automotive industry, which includes guarantees to provide loans of up to £1.3 billion from the European Investment Bank, as well as a further £1 billion in UK government loans to fund investments in environment-friendly vehicles.

Tuesday, February 24, 2009

Workers at Tata's Jaguar plant to vote on pay freeze deal

S Kalyana Ramanathan / London February 25, 2009, 0:48 IST

Around 12,000 workers in Tata Motors-owned Jaguar Land Rover (JLR) are set to vote on an agreement for a year-long pay freeze and also a four-day week, to avoid job cuts for the next two years. Should the management and unions agree on this new deal, it will be be then decided by ballot count early next week. If it comes through, the UK car maker will save up to £70 million (Rs 500 crore) annually in costs.

Joe Morgan, regional secretary of the GMB (the labour union), commenting on the JLR proposal, said “GMB members are deciding this week. GMB will support them in whatever decision they make.”

However, an ongoing plan to remove 450 jobs (300 managers and 150 agency or contract wokers) at JLR, part of the original plan to cut 2000 jobs, will be implemented, said a company spokesperson. Adding: “(It is) also important to underline that the agreement would relate to there being no compulsory redundancies over two years. We have so far only had voluntary redundancies in previous programmes.”

In calendar 2008, Land Rover had witnessed a 17 per cent fall in sales, while Jaguar improved its sales by 8 per cent during the same period, says the group's representative in the UK.

JLR’s woes are not an isolated case in the UK automobile market. Nissan and Honda have also announced job or production cuts due to the falling demand for cars globally. Early last month, Nissan had announced shedding of 1,200 jobs in the UK, while Honda had announced, this month, the closing of its Swindon plant for four months, through May 2009. Honda however has not announced any job cuts in its UK plants so far.

Car production in the UK continues to fall. In January, according to the industry body, SMMT, car production fell by 58.7 per cent, to 61404 units, while production of commercial vehicles fell by nearly 60 per cent, to 8351 units.

In January, the UK government announced plans to help the industry, including guarantees to provide loans of up to £1.3billion (Rs 9,500 crore) from the European Investment Bank, as well as a further £1bn (Rs 7,250 crore) in UK government loans, to fund investment in environment friendly vehicles.

Thursday, February 5, 2009

Europe model to make bulk car transport cheaper

Europe model to make bulk car transport cheaper
S Kalyana Ramanathan / London February 06, 2009

An existing European rail transportation solution is on its way to India that could well see bulk transporters on Indian Railways, which would see car makers cutting their transportation cost to a fourth of what it is now.

Coventry-based advanced engineering and rail logistics solution provider Focal Ltd, along with AFR of France and KK Birla Group company Texmaco Ltd, is proposing to deliver a new two-tier wagon to the Indian Railways on a turnkey basis. This comes with a patented wagon from AFR and a backhaul trolley (BHT) patented by Focal to be used on the railway network.

From an average of 125 cars being moved in single shipment (assumed at 11 wagons per train), the new solution promises to move as many as 400 small cars at a time. This, of course, will be done using a two-tier wagon that is a common feature for car makers in Europe and other advanced markets.

Focal’s chief executive Rod Hilditch said that the three partners in the new deal would soon sign a joint venture agreement where Texmaco will manufacture these wagons fitted with Focal’s BHT to be supplied to Indian Railways.

Hilditch said that the design of the new wagon, though commonly used in Europe now, would need the approval of the Research Designs and Standards Organisation, Lucknow. If approved by RDSO, commercial production of the new wagon is expected to start by the first quarter of calendar year 2010.

Hilditch said that nearly 24,000 such wagons are already in use in Europe and estimates that the initial target is to deliver around 5,000 wagons for the railways. The cost of making these wagons is also expected to be much lower in India at £180,000 (Rs 1.28 crore) each, against £250,000 if made in Europe. He also estimates that for a well rail-networked country like India, the demand could be as much as 50,000 wagons in the long run, which roughly translates to £1 billion worth of business.

The new design could also decongest the roads as heavy cargo like cars and automobile parts can now move on the railway network. At present, most automobile manufacturers prefer to move both inbound and outbound cargo by road. Moving cargo by rail is also considered more environment-friendly. Moving a tonne of cargo over one kilometre by road would roughly translate to an emission of 177.8 grams of carbon, while it would be around 21.7 grams when moved by rail, Hilditch said, quoting prevalent norms in Europe.

Leading car makers in India like Maruti Suzuki along with industry body SIAM is already working with Indian Railways to develop auto wagons which again would be double-decker with a capacity to carry 270 cars per rake, said a company official.

The new wagons, apart from moving finished cars from factories to various dealer outlets in cities across the country, will also be a major cost-saver for major car exporters like Hyundai and Maruti Suzuki.

Hilditch said while car makers were obvious users for these wagons, these can be used by other bulk movers in the food and retail sector.

Wednesday, February 4, 2009

Panel cautions against excessive haste in liberalising capital a/c

Panel cautions against excessive haste in liberalising capital a/c
S Kalyana Ramanathan / London February 03, 2009
The Committee on the Global Financial System (CGFS) in its report on "capital flows and emerging market economies" released today said that excessive haste in liberalising capital account has the potential to compromise financial or monetary stability in emerging market economies (EMEs).
The CGFS headed by Reserve Bank of India Deputy Governor Rakesh Mohan was, however, quick to add that excessive rigidities in capital account management can also lead to difficulties in macroeconomic and monetary management.
The CGFS concluded its one and a half year study of more than 20 emerging market economies, starting from the Asian economic crisis of 1997 to the recent credit squeeze in the global economy.
"In principle, the flow of capital between nations brings benefits to both capital-importing and capital-exporting countries. However, very large flows can also create new exposures and risks. This has become apparent with the extraordinary surge in capital flows - total capital inflows reached $1,900 billion in 2007, four times as large as in the period before the Asian crisis - and the subsequent very large reversal of foreign investment in emerging market assets in 2008," said a media release issued today by Bank for International Settlements under which the CGFS was constituted.
Large foreign currency inflows have had major consequences for the liquidity of domestic financial systems. The report discusses the advantages and drawbacks of central banks' market and non-market instruments. It notes the complex interrelations between monetary policy, exchange rate objectives, forex intervention and domestic financial balance sheets.
There is a strong two-way link between capital flows and the resilience of the financial system. Capital flows do most good and least harm when domestic financial markets are developed and local financial firms are strong. At the same time, the greater presence of foreign investors should improve the operation of local financial markets.
The report argues in favour of a combination of policies - sound macroeconomic policies, prudent debt management, exchange rate flexibility, effective management of the capital account, the accumulation of appropriate levels of reserves as self-insurance and the development of resilient domestic financial markets - provides the optimal response to the large and volatile capital flows to the EMEs. "How these elements are best combined will depend on the country and on the period: there is no "one size fits all," Mohan said.

'Helping a big group like Tatas is a big dilemma for govt'

Q&A: Brendan Barber, Chief of UK's Trade Union Congress
S Kalyana Ramanathan / London 3, 2009,

Brendan BarberBrendan Barber, the 57-year-old chief of United Kingdom’s apex labour union, Trade Union Congress (TUC), is in sharp contrast to the fire-spitting, red flag-waving union leader common in India. For the starters, he is also a non-executive member on the board of the Bank of England.

This is a difference Barber is conscious of and says he will not lecture on what his comrades in emerging markets should do or how they should do their job. Barber shares with S Kalyana Ramanathan his thoughts on the recession in the United Kingdom and the rest of the world and hints at challenges British companies owned by non-British groups may face in getting the UK government’s support to tide over the recession, even as he treads carefully not to sound nationalistic in a globalising world.

Do you have your own prescription to tide over the present recession in the UK?
The government has been addressing some of these issues, though we are yet to see the impact of some of the decisions that have already been made. There is still work to be done to see the banking system working — to try and get banks to lend properly. A lot of financial institutions are withdrawing to the home base to try to build up their balance sheets again. In the case of British companies, 30 per cent of the lending came from international banks.

In terms of stimulating the economy and trying to keep people in their jobs, the idea is to make big investments in major public works, which the government has talked about but has not yet been able to deliver. I would attach a lot of importance to that. We still have major social housing needs in Britain. We still have many problems with transport infrastructure that need attention without making work for the sake of making work.

Hence, I will kind of group the major issues in three areas — banking and financial issues, public works issues and measures in the labour market to try and help workers through these difficult times.

How does the TUC reach out to large emerging industrial economies like India?
If British companies are trying to set up business in India, they should have an open and friendly approach to labour (issues) and be open to trade union organisations. So when some of the big banks offshore to India, we make sure that they are open to unionisation.

Are they doing it?
Yes, to some extent. Barclays, for example, is doing it.

Tech companies in India have predominantly stayed outside the ambit of trade unions. Cases like Barclays seem to be an exception.
I would say it is an exception. As you say, unions have struggled to establish (themselves) in growing (tech) sectors. We are assisting where we can and trying to assert some influence.

Is ownership of companies like Corus and Jaguar-Land Rover making it difficult for unions to push their agenda given the job cuts declared by companies like these in the recent past?
It is not viewed as a major issue. But clearly, for the government being asked to provide substantial financial support to a huge global company like Tata, the government wants to be convinced that the company could not itself provide the additional funding to tide its British operations through a difficult time.

So there is that extra dilemma that if it is a wholly owned British company whose accounts are totally transparent, it is easier for the government to make a judgment about how much help is needed from the tax-payers and not quite so easy to make that judgment if you are dealing with a massive global conglomerate like Tata.

Are you suggesting that the ownership of these companies is working against them now?
No, I don’t think that necessarily. We were not opposed to Tata taking over (these companies). They have the capacity to make major investments and develop these companies. Clearly, the problem in the steel industry is huge on a global scale, and in the car industry as well. I am simply describing the different complexities for the government being asked to provide major support if it is dealing with a company with interests spread around the world.