Jaguar Land Rover – along with the rest of the global automotive industry – is facing “a once-in-a-century” crisis, David Smith, the company's chief executive, has said.
A full-blown economic recession, combined with a continuing refusal by banks to free up normal credit flows, is an “extraordinary state of affairs” that has slammed the brakes on sales and cash flow, he added.
Mr Smith, who was speaking ahead of the resumption of talks between Jaguar Land Rover and its Indian owner, Tata Motors, and the government on Wednesday, has already confirmed that more job losses will follow the 600 redundancies already announced by the company.
JLR has also responded to the downturn in trading by terminating the contracts of about 850 casuals and putting its three production plants on extended Christmas/new year shutdown.
The company, which directly employs about 16,000 people at sites in Birmingham, Coventry and Liverpool and underpins thousands more at suppliers and dealers, is asking the government for short-term financial aid in the form of interest-bearing loans or loan guarantees.
The company has not put a figure on the sum it is asking for, but industry sources assess it at about £1 billion over two years. Mr Smith did confirm, however, that it has also asked the government to help car finance companies, who themselves rely on the credit markets, to begin lending to consumers again at normal levels.
Mr Smith said that JLR, together with the UK car industry generally, was asking the government to help stimulate demand and free up commercial lending.
“We are not interested in bail-outs or hand-outs,” Mr Smith said, adding that Tata was in the process of pumping hundreds of millions of pounds of new working capital into JLR but was itself suffering from restricted credit flows.
“It would be much more efficient if we could actually get that funding from the banks,” he added.
Tata Motors bought Jaguar Land Rover from Ford for about £1.1billion in June last year and promised to keep the company’s production plants at Castle Bromwich, Birmingham, Lode Lane, Solihull, and Halewood, Merseyside, open for at least five years.
The first half of 2008 saw a strong revival in the fortunes of the two brands after years of uncertainty under Ford’s ownership.
Land Rover was celebrating the best annual sales figures in its 60-year history while Jaguar, a perennial loss-maker for Ford, was launching the new XF mid-range sports saloon car which is now proving one of its most successful models ever.
JLR made an operating profit of £327million in 2007 and a surplus of £310million in the first six months of 2008.
The company, which is one of the country’s biggest investors in low carbon, sustainable technologies, was also recruiting large numbers of engineers to work on development projects at its centres at Gaydon, Warwickshire, and Whitley, Coventry.
But the situation had deteriorated badly by the time of the Paris Motor Show in early October.
Mr Smith told the Birmingham Post at the time that central banks and governments needed to take “bold and concerted” action to prevent harm to the manufacturing economy.
By then JLR was cutting production to prevent stocks of unsold cars piling up and warning that job cuts were likely. Four months on, the company, together with its competitors, is fighting to prevent a meltdown of an industry that employees 850,000 people in the UK and contributes more than £50million to the national economy.