In autumn 2019, Jaguar Land Rover invited guests from around the world to witness the opening of the new Jaguar design centre in Gaydon, England.At 129,000 square feet, the studio was a third larger than the one the team had vacated and matched in size the adjoining Land Rover design space.
The studio, part of a wider $700 million overhaul of JLR’s engineering facilities, was the latest in a series of expensive capital investments aimed at helping CEO Ralf Speth achieve his long-sought goal of selling a million vehicles annually.Just 18 months later, that plan is in pieces, torn up by a new CEO, Thierry Bollore.
Since joining JLR last September, the former Renault CEO quickly determined that the British brands could not achieve Speth’s dream of competing head-to-head with the likes of BMW, Speth’s former employer.Bollore gave a stark assessment of JLR’s problems. “Our Jaguar business has not performed. Our manufacturing capacity and operational organisation is not structured for maximum efficiency,” he said during an online speech to investors in February. “And despite visible improvements in quality, our customer satisfaction level is too low.”
Bollore’s solution was drastic. Under his Reimagine plan, none of Jaguar’s current range will be replaced. Instead, the storied brand will go all-electric starting in 2025, underpinning its lineup with a new platform sourced from outside the company and positioning itself much more upmarket and exclusive.
He wrote off £1 billion of investment into the planned Modular Longitudinal Architecture electrified platform that had been designed to underpin the bulk of future Land Rover and Jaguar models.
Vehicles on the so-called “MLA low” and “MLA mid” architectures were canceled, including the long-heralded electric Jaguar XJ sedan, a lower-riding electric Land Rover dubbed “Road Rover” by the U.K. press and the Jaguar J-Pace crossover.Only the “MLA high” architecture was retained because it will be used for the imminent replacements for the Range Rover and Range Rover Sport large SUVs, the company’s twin profit engines.
JLR has been in cost-cutting mode since a sharp change in its fortunes in China forced a write-down of £3.1 billion (then $4 billion) for the quarter that ended December 2019, signalling the end of a run of incredible profits that reached a high of £2.6 billion in 2015.
The company, owned by India’s Tata Motors, reduced its work force by more than 7,000 people to about 35,000.Bollore’s plan, however, marks a change of thinking at the company following Speth’s reign since 2010. Ambitions are no longer linked to volume and the “British BMW” dream has been laid to rest.”
Taking on BMW, Daimler or Audi makes no sense for a company that is a quarter of its size,” CFO Adrian Mardell said during the February investor day.”Many billions of pounds were spent on bricks and mortar and infrastructure,” Mardell noted, singling out the Gaydon engineering centre from where he, Bollore and Chief Creative Officer Gerry McGovern delivered their presentation to investors.”
That was following the original strategy of a million units. That structure has changed,” Mardell said.The CFO spelled out how damaging JLR’s spending frenzy was to its profits using his slide deck. He noted how investment spend overtook operating cash flow in 2017 as the number of vehicles JLR needed to sell to reach breakeven rose to 600,000 in its 2019 financial year from 425,000 in the 2014 financial year.
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