January 2014 | Peter Curtis
Back in cruise control
A commitment to investing in new products, research and development, and engineering expertise has seen Jaguar Land Rover record strong growth in profits, and become one of the biggest exporters in the United Kingdom
Anyone wanting to understand the contribution of luxury carmaker Jaguar Land Rover (JLR) to the United Kingdom economy — and the recovery of the country’s manufacturing sector — in the past few years just needs to look at the numbers.
Pretax profits for the year to March 2013 rose 11 percent to £1.68 billion on revenues that increased by 17 percent to £15.8 billion. Export sales, spread over about 170 countries, jumped to £11 billion in 2011-12. In the past two years, JLR has created 9,000 new jobs in Britain and generated a further 24,000 in the supply chain. The company invested £2 billion in new products and infrastructure, R&D and skills development in 2012-13, and is spending a further £2.75 billion this financial year.
It’s no wonder politicians from all three major British parties, including Prime Minister David Cameron, lined up to praise JLR’s economic impact during the recent party conference season. Four years back, however, it was a different story. Like its competitors in the automotive industry, the company was hit hard by plummeting demand in the wake of the financial crisis, recording a pretax loss of £280 million in the 10 months to March 2009.
So how did JLR turn things around? The company had to take a series of tough decisions during the global downturn, including production shutdowns, laying off temporary workers and voluntary redundancies. Crucially, it continued to invest in new products and research and development, meaning that it had new vehicles to offer when confidence began to return.
Mike Wright, executive director at JLR, was part of the management team during the Ford era and helped lead the initial stages of Tata Motors’ acquisition of the company in 2008. He believes three factors have driven the company’s resurgence.
“The first is an absolute focus on generating new products for both brands,” he says. “The second has been a real drive to expand our global revenues, maximising the opportunities not only in our mature markets but also in emerging and emerged economies, most notably China. Third, we have really concentrated on ensuring we have the right level of investment in R&D and product creation to allow our conveyor belt of products to continue to roll over time.”
New models sell well
That conveyor belt saw JLR sell more than 374,000 vehicles in 2012-13 (up 23 percent year-on-year). New models such as the award-winning Range Rover Evoque — of which more than 220,000 have been sold since its 2011 launch — and this year’s Jaguar F-Type have garnered the lion’s share of the headlines.
The company has also focused on replacing its existing range with the launch of a new Range Rover and Range Rover Sport. Improved engines, offering lower CO2 emissions and greater fuel economy, have enabled JLR to enter new sub-segments in a number of markets. The addition of an all-wheel drive to the Jaguar XJ and XF has made the models more competitive in the snowbound North American market.
The backing of Tata Motors, which acquired JLR from Ford for $2.3 billion in June 2008, has been crucial in the company’s success over the past few years. Mr Wright says, “They have really challenged us to make these businesses perform and grow, encouraging us to take a long-term perspective without letting up on delivery in the short term. They have given us the opportunity to fulfil the potential of the Jaguar and Land Rover brands, and they have encouraged us to focus our resources and the money we make on product investment.”
As part of that investment programme, JLR is building a £500-million facility at Wolverhampton to manufacture its own engines (currently supplied by Ford). This will generate a further 1,400 jobs. And it has recently announced a £1.5-billion investment in a technically advanced, lightweight and high-strength aluminium vehicle architecture, creating 1,700 new jobs at its advanced manufacturing facility in Solihull.
This fuel-efficient technology will allow JLR to enter new markets and segments and provide a platform for a significant expansion of product ranges of both the brands, beginning with a new mid-sized sports sedan from Jaguar in 2015.
JLR’s investment in production capacity and capability has been supported by a strong focus on developing the skills of its staff and deepening its engineering and R&D expertise (see box: Meeting the skills challenge). It has also contributed £50 million to a £100-million project to create the National Automotive Innovation Campus, a new research facility at Warwick University that will bring together researchers and engineers from JLR (and its supply chain) and academics from leading British universities.
Mr Wright says that JLR has benefited from the resurgence of the British automotive industry and the country’s reputation as a manufacturer of luxury vehicles. “One of the things that distinguishes us in the global marketplace is the unique characteristic of British design and engineering,” he says. “That’s a powerful force in making JLR a strong brand.”
While the heart of JLR is in the United Kingdom, it is firmly committed to expanding its international footprint as it seeks to become globally competitive and gain access to new markets. That has seen it invest in its dealer networks, training and behind-the-scenes infrastructure to market its brands worldwide and provide high-quality after-sales service.
The China expansion
In China — where sales rose 48 percent in 2012-13 — JLR has opened ‘Land Rover Experience’ centres to familiarise consumers with the brand. It has also invested £500 million in a joint venture with Chinese carmaker Chery that will give it better access to the market. And a new plant near Shanghai will manufacture Jaguar and Land Rover vehicles as well as joint-branded vehicles.
Additionally, the company has an assembly facility in Pune, India, for the Land Rover Freelander and Jaguar XF, and is currently considering whether to open plants in Brazil and Saudi Arabia.
These initiatives are part of JLR’s ambitious, long-term plans to achieve sustainable growth and achieve a balance of sales across its six global regions. Mr Wright says that the company’s future strategy is “more of the same”, focusing on product development driven by increased investment in R&D, engineering, modernised facilities and skills. “There are plenty of actions in place to drive growth,” he points out. “But we can’t be complacent — there’s a lot to do.”
|Meeting the skills challenge
Finding the right engineering and technical skills isn’t always easy — particularly in the United Kingdom, where Jaguar Land Rover (JLR) employs about 95 percent of its 26,000 workers globally. The company is encouraging youngsters to join the automotive industry and has recruited nearly 300 graduates (mostly in engineering) in each of the past three years and visited schools and universities to engage young people and get them to consider careers in the sector. JLR is also backing a university technical college in Warwick. This is a new type of school for 14-19 year-olds, teaching technical skills alongside the regular academic fare.
JLR has made a significant investment in its apprenticeship programmes: currently more than 500 people are enrolled in its advanced and higher apprenticeship schemes. “We’ve also put in a syndicated programme with a number of universities that allows our apprentices to take modules from different academic institutions and come out with an accredited engineering degree,” says Mike Wright, executive director, JLR.