Moneycontrol
Last Updated : Jan 11, 2019 02:30 PM IST | Source: Moneycontrol.com

Quick Take | Behind JLR and Ford job cuts: China and Brexit

Both JLR and Ford need to be ready for the future that will be of autonomous and electric cars. This would require fundamental redesigning of the way they run their businesses.

Sounak Mitra @sounakmitra

Sounak Mitra

Jaguar Land Rover and Ford announced massive job cuts on 10 January. The timing may be a coincidence, but the reasons are common.

One, both the companies have been suffering from a sharp decline in sales in the once-lucrative Chinese market. Two, auto sales in Europe fell during the past few quarters as production was hit by new emission norms and slow economic activity in the region. Three, Brexit had a role to play in slowing sales and eventually make things worse in the Euro zone for some time. Four, the auto industry has been undergoing a rapid shift in focus from diesel and petrol to electric and autonomous cars. Besides, the love for saloons, hatchbacks and sedans is fast shifting to SUVs and cross-platform vehicles. In effect, companies need to change and ready themselves for the future.

JLR’s sacking of 4,500 employees globally, mostly from management roles, did not come as a surprise. The first hint came when the firm announced a £2.5bn cost-saving programme (over 18 months) in October 2018. In 2018, JLR  cut 1,500 jobs and saved around £500 million.

The precipitous dip in China sales has hastened the firm’s search for more cost cutting. In 2018, sales in China dropped around 20 percent; in December, they plunged by 42.4 percent. Sales in Brazil has also been declining.

But what came as a surprise is its announcement to invest a few hundred million pounds in making electric vehicles at its Wolverhampton factory and a new battery plant at Hams Hall in Birmingham that will be operational by 2020. Clearly, JLR is readying itself for the future. An all-electric Land Rover (in the foreseeable future) that can potentially take on Tesla isn’t a bad news. The possibility of exotic hybrid cars can’t be ruled out.

Ford, on the other hand, has some way to go yet. Not only has China been a pain point for some time - sales there fell around 38 percent in 2018 (till November) -, it is also worried about Brexit. The company has shuttered loss-making units, which has led to loss of thousands of jobs, but doesn’t solve a fundamental problem. Ford makes too many products. It aims to have a car for everyone.

That model is making less and less sense in the current scenario given the way the automotive industry is heading. Ford needs to change. It had said that the European operations overhaul was a “fundamental reset and redesign of its business”. Similar exercises across its global operations would not be surprising.
First Published on Jan 11, 2019 02:28 pm
Loading...
Sections
Follow us on
Available On
PCI DSS Compliant