Saturday, 6 September 2014

Pay-back time arrives for JaguarLandRover

Jaguar-branded vehicles are expected to double in production with the arrival of the XE sports saloon from the 77,000 level achieved in 2013. But just when this happens remains to be seen.

Certainly, the arrival of the make-or-break car, on which so much has been invested, is expected to help the company edge past the 500,000-mark for this year.

But the arrival of any new vehicle when the year is edging to the three-quarter mark, is not leaving much time to bolster output this calendar year.

The arrival of the new car from a new £1.5 billion facility in Solihull, Warwickshire, together with a new £500 million diesel and gasoline engine plant at Wolverhampton will provide the impetus for the increase.

However, while the new XE saloon and its associated aluminium-intensive body-in-white and final assembly shops are risky in the current competitive climate, the new Ingenium engine plant is less so in that both engine families – diesel and gasoline – will be spread across the entire Jaguar and Land Rover product lines, spreading the risk. Indeed, these engines are badly needed to reduce reliance on existing powertrain products and to breath new life into future vehicle products.  

The new vehicle manufacturing unit at Solihull, the archetypal home of Land Rover and the original Rover Company, will need to produce 300 units a day to match last year’s Jaguar-marque production. This is 20 an hour on two shifts allowing for efficiency, one every three minutes.

This will be hard to achieve in ramp up and it may take six months for the plant to settle down to a rhythmic routine, with all the implications of just-in-time deliveries and so on. Added to which, new press lines and other processes have been introduced which inevitably take time to stabilise.

In 2013 JaguarLandRover produced 425,000 vehicles, an increase of 19 per cent. If the same level of increase can be achieved that the 2014 figure should reach 505,750, most of which should be accounted for by XE.

In 2013 Jaguar-marque sales rose 42 per cent to 77,000 whereas output of Land Rover vehicles went up 15 per cent to 348,000 units. With an employment level of around 30,000 this gives a figure of 11 vehicles per employee.

Profits for the first quarter of 2014 were up 22 per cent to £925 million on the back of revenues up 31 per cent to £5.35 billion. So in the year 2014-2015 the company should more than comfortably exceed revenues of £20 billion.

There is a limit to the extent these multiples can be continuous achieved, but the tipping point has been reached in one sense; it is now pay-back time to deliver the profits to achieve the returns for funds invested both at Solihull and Wolverhampton if the company is to continue investing in facilities around the world to maintain the standards that will come to be expected.

To those whom much is given, much is expected.

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