Jaguar Land Rover is to axe 450 jobs, including 300 managers, as part of a cost-cutting exercise, the company has announced.
The cuts, including 150 agency staff, follow the "severe reduction" in demand for new cars, said the company.
Jaguar Land Rover also announced that managers will not receive any bonuses this year, while pay rises have been deferred to October.
The firm, based in Gaydon, Warwickshire, has 15,000 employees with plants in Coventry, Solihull, Castle Bromwich and Halewood on Merseyside.
The company said it had started consultations with employee representatives on the proposed redundancy programme, adding: "Clearly these choices are very difficult. No company wants to lose skilled and experienced employees in any condition. Throughout the process we will ensure employees are treated with dignity."
Chief executive David Smith said: "It is only right and proper that our response to the unavoidable impact of the credit crunch and a severe reduction in demand includes actions across all grades and functions in the company.
"We don't expect sales conditions to return to normal levels for some time. If we are to continue to fund and invest in the products and technology that we will need to be successful when customer demand picks up again after the recession, then we have to improve our efficiency and costs, to improve our ability to respond to the marketplace.
"It is critical that Jaguar Land Rover becomes a more efficient and dynamic organisation to face up to the challenges that we will meet in the years ahead."
Jaguars are made at Halewood and Castle Bromwich, while Land Rovers are produced at Halewood and Solihull. A wood veneer plant at Coventry supplies both marques, while the company has two research and development centres in Coventry and Gaydon.
Managers are spread across all the sites. The annual Christmas shutdown was extended this year because of the fall in sales, with production resuming only this week.
Jaguar Land Rover launched a voluntary redundancy programme last year which will see over 500 workers leave the company by the end of the month.
Jaguar Land Rover has been involved in pleas from the motor industry for Government to take action to ease lending, both for companies and car buyers.
"We are still keen to hear from the Government," said one official.
The grim news follows a Nissan announcement of 1,200 job losses last week from its plant in Sunderland and cuts at a number of firms which supply parts to the motor industry.
A spokesman for Prime Minister Gordon Brown said: "Obviously, the Government is disappointed to hear this news. All company job losses are, of course, regrettable.
"Jaguar Land Rover's decision today reflects the continued downturn in the market and that is a reflection of what is happening more generally in the global economy.
"The JobCentre Plus rapid response teams will offer support and work to offer a package of measures to help those facing redundancy to find other work as quickly as possible."
