Jaguar Land Rover posts record loss

The long-term viability of Jaguar Land Rover has come into question after the Indian-owned premium car-maker posted a $4US billion loss in 2018’s fourth quarter.

The result effectively means that, without significant cash input from its Indian parent company or an outside investor, JLR is on schedule to run out of money in about a year.

JLR has lost an average of £670 million a quarter over the last year and its report reveals that its cash-on-hand has dropped to just £4.4 billion, plus a £1.94 billion credit line that falls due in 2022. Its debt stood at £4.7 billion on December 31.

Stunned by the scale of the losses, JLR blamed most of the company’s latest financial crisis on its failure in China, where its sales dropped to just over 110,000 cars.

Owned by Tata Motors, JLR remains riddled with inefficiencies, even a decade after emerging from Ford ownership, and saddled with underperforming nameplates like the ancient XJ, the also-ran XE and the oddly styled Discovery.

The biggest car-maker in the UK, JLR is in the process of cutting 4500 jobs (about 10 per cent of its workforce), in addition to the 1500 workers that left during the course of last year.

China has provided a platform for most of the world’s premium brands to grow, but JLR has largely failed there.

Its volumes dropped 35 per cent there in the last nine months of 2018 and it lost more than £270 million there while Mercedes-Benz, Audi, BMW and Porsche reaped huge profits.

Perhaps the strangest part of the announced loss is that most of it comes from a $US3.9 billion impairment charge which could just as easily attributed to its 2017 accounts.

Indeed, it forecast the write-down in its 2017 annual report, which insisted there was the: “Risk of an impairment due to optimistic expectations of future sales volumes and/or gross margins".

It explained its own 2017 bottom line might not be a true indication of its financial footing, explaining: “Changing technology plans (e.g. electrification) and industry trends (e.g. reducing diesel sales) are not properly considered in the impairment calculations.”

So the impairment charge was pushed back to the 2018 accounts, which is an admission that the assets won’t deliver the revenue expected of them due to JLR’s poor performance in China, the cost of its own debt and new technology overcoming its own diesel-focussed powertrains.