There are exciting opportunities for business'

Q&A: David Smith, CEO, Jaguar Land Rover
S Kalyana Ramanathan / New Delhi July 11, 2009,


David Smith, 48, the big boss at British car maker Jaguar Land Rover (now owned by Tata Motors), says he has a strategy to make the financial bleeding stop and return to profitability soon. With just over a year as CEO of JLR, Smith has his hands full, with the unions on one side and the urgency to trim costs and return to profitability on the other. His biggest challenge, however, is outside his own control — the global economic recession that is keeping luxury car buyers away from his dealerships. Excerpts of an interview with S Kalyana Ramanathan:

The Euro 340-million loan from the European Investment Bank is waiting for the UK government’s gurantee for over three months now. Are you running out of time?
We are all impatient. The loan was approved in April. What we need to do is make an agreement with the UK government around guarantees. We are still working through that negotiation, providing a lot of financial information. At the end of the day, we have to ensure the terms of the loan are commercial.

Is the UK government’s demand for a board berth in JLR holding back its gurantee for the EIB loan?
I think, we all believe that the government is not very good at running companies. Anything we agree with the government or in fact with any other lender should not interfere with our ability to run the company. Any agreement we do reach is commercial and gives us the ability to run the business properly.

That clearly rules out your willingness to give a board berth and provide only the assets to back the government’s gurantee.
Yes, that’s what I think a commercial loan implies. Its really about making sure the government has the right security, gets the right information and reporting, and it’s not about running the company.

Is the fact that JLR is now owned by a non-UK parent making negotiations with the banks or the UK government more difficult?
No, I don’t think that’s the case at all. It has more to do with the economic conditions and conditions of the banks itself. They are just being very cautious. In fact, a high proportion of UK companies, including listed companies, have foreign ownership. So, that isn’t an issue at all.

Given the constraint of time, are you also looking at an alternate source of funds?
We are. Naturally, we have been working with a number of commercial banks, both in India (Bank of Baroda) and UK. We already have some inquiries and that’s going well. And that’s more or less close to being done as well. We are not only trying to find money for the ongoing working capital requirements, but also for big investments in the future. We want to invest in green technologies, in new products, entering new markets, including the strategies to enter into India that we recently launched. There are a lot of exciting opportunities for the business.

Given the present pressure to contain costs, would Tata Group have a bigger role to play in JLR now? Have you finalised your parts’ sourcing plans from India?
We are already using some of the services from India, like IT and engineering. It’s too early to put a number to it now. We roughly source 20 per cent of our component requirements from outside the UK/Europe supply base. Most of this is from Eastern Europe now. We want to increase that to a third. That clearly is the opportunity. This is not just India, but India will have a natural advantage with a company (Tata Motors) that is familar with India. We already have some experience in sourcing components and engineering services from India. Those have been a good expereinces and will help us accelerate it.

JLR dangles carrot to push back salaries for 15 days

S Kalyana Ramanathan / London July 02, 2009

The management of Tata Group-owned Jaguar Land Rover has offered a one-time payment of £200 to those of its salaried employees who are willing to push their salary receiving date by 15 days, starting from August this year. This is part of the car maker’s plans to manage its cash flow problems, pending fresh flow of funds from banks to manage its operations more smoothly.

A JLR spokesperson said this offer will apply to nearly 6,000 of its 14,500 employees who are categorised as salaried employees. The rest of the workers are paid weekly. He further said 25 per cent of those to whom this offer was made have already accepted it.

A statement from the company said, “It is not an unusual business practice for employee salary payments to be made at the end of each month, but Jaguar Land Rover has a legacy system whereby these payments are currently made mid-month. In its ongoing plans to streamline business operations and aid cash flow, the company is seeking to adopt this industry norm and, in recognition of the possible inconvenience to employees whose accounts are currently arranged around mid-month payments, is offering a one-time payment of £200 to those employees who agree to the change.”

The company spokesperson further said, “(This) should be taken in the context of a number of actions being taken across the organisation to streamline operations and, as another example of our ongoing policy of working with employees on change, much effort has gone into minimising any short-term inconvenience for employees...(and) over 25 per cent of affected employees accepted the proposal in the first 48 hours and we anticipate a very strong and positive overall response to the request.”

This development comes at a time when JLR has been facing several challenges affecting its day to day operations, including a delay in securing the UK government’s guarantee for a £340 million (Rs 2,700 crore) “green loan” approved by the Luxembourg-based European Investment Bank (EIB) in April. JLR’s financial performance, due to poor demand for premium and luxury cars globally, has been particularly weak, resulting in a loss of £281 million (Rs 2,234 crore) for the 10 months ending March 31.

The poor performance has also severely impacted the bottom line of its new parent, Tata Motors as well. Tata Motors’ full-year earnings report to March 31, issued last week, showed that JLR’s global retail volumes since June 2, 2008, when it took over, were down 28 per cent overall — Jaguar was actually up 1 per cent and Land Rover down 35 per cent. This was also the first time JLR has been included in Tata Motors’ earnings report and reflects a reversal in the company’s fortunes since its purchase. Prior to this, JLR had reported a strongly profitable 18-month performance in the period up to May 31, 2008, when it was owned by American car maker Ford Motor Company.