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.