Jaguar Land Rover's half billion comeback

How will history treat Ford's sale of Jaguar and Land Rover to Tata?

The divestment of the two British brands (and Volvo to Geely) has been a case of expediency for the one American auto manufacturer that avoided Chapter 11 bankruptcy proceedings.

But within 12 months of the two companies combined (Jaguar and Land Rover) posting a £64 million loss, they've now announced a £221 million profit after tax -- quite a roller coaster ride in one year.

"We had a wonderful quarter -- both as Tata Motors as our overriding company, but more specifically for us as Jaguar Land Rover," local Jaguar spokesman Mark Eedle told the Carsales Network earlier today.

"The quarter for April to June -- a £221 million profit after tax; the third successive time we've declared a profit after tax; and considering that April to June 2009 was a £64 million loss -- that's a £285 million after-tax-profit turn-around in 12 months.

"It's wonderful news for Jaguar Land Rover and obviously shows that for the '10 model year -- [with] the products that we're putting out there and increased demand due to the economic climates -- we're on the right track..."

Eedle wasn't in a position to reveal whether certain models were more influential in the improved bottom line.

"We don't even break it down [the profit] between Jaguar and Land Rover... let alone individual models. But you look at the volume that we do and obviously the XF is the highest volume of our products and contributes a fair proportion of the profit. Having said that, the other models are also great products -- and with XJ starting to come on stream, it will start to contribute..."

Eedle was of the opinion that the latest XJ (pictured) had arrived on the scene too late to have much bearing on profit during the second quarter, but for the two companies to achieve the impressive profit prior to the XJ's release was a good omen.

"That's a very encouraging situation... in that we have had the success we've had in April to June without a full-quarter impact of the new XJ. You would suggest that that bodes well for the future."

Eedle also said that the local prospects are looking very favourable for the new flagship of the range.

"It's very early for sales [analysis], but the level of enquiry has been very encouraging [and] the quality of enquiry has been very encouraging -- as in it's not just people going 'look at that', it's like 'hang on, I really want to know about this car'."

So it's early days yet, but the signs are looking positive for Jaguar and Land Rover. In fact, with Tata Motors chief executive Carl-Peter Forster confirming that the X-Type sedan would be replaced and with the new Range Rover Evoque on the way, Tata's prestige marques look set to be hit by a sales avalanche.

But will JLR be prepared for that avalanche? Demand so far has outstripped Jaguar Land Rover's ability to supply cars. Eedle was very careful to place that situation in what was the appropriate context from his own perspective.

When asked whether the demand for Jaguars and Land Rovers over the past year had been unforeseen by Tata and the management at the two companies, Eedle placed the blame squarely at the door of the GFC. He put his own view that anyone who could predict -- "in early '09" -- how the market would fare 12 months on was "fairly ambitious".

"I wouldn't say it was a lack of anticipation of demand for our cars... it may very well have been a difficulty that everybody is experiencing to predict what the market is going to do."

The effect of the unexpected demand has trickled through to JLR's suppliers also -- including former parent company, Ford. As reported by business news publisher Bloomberg a couple of days ago, Jaguar and Land Rover are demanding more engines from Ford than the former parent company can supply. According to Eedle, it's a problem not just affecting Ford, with other suppliers to Jaguar Land Rover also labouring to meet the unexpected demand.

"Obviously balancing the variations in supply to meet current and future demand is part of an everyday practice," explained Eedle.

"It's good news that our demand is up and so we're in discussion with a number of suppliers about increasing the volume of components they can supply to us.

"Through '08 and the first half of '09, numbers were all down and so I'd suggest that Ford planning was a very challenging task. But it's lovely that on the back of '10 model year launches for both brands [Jaguar and Land Rover] that we are seeing the demand increase as much as it is.

"That then requires us to have our suppliers ramp up as well..."

Industry observers have hinted that Ford is reluctant to increase engine production to accommodate Jaguar Land Rover, lest the demand for the prestige cars evaporate overnight, leaving Ford with a glut of engine stock.

"[Ford has] met all their obligations to us," said Eedle. "We now are engaged in discussions about increasing the supply beyond our current requirements. They've upheld what the agreement was."

While it may be too early to call, if discussions fail to bear fruit or if they lead to some friction between supplier and customer, it may drive Tata and JLR to look at other external suppliers -- or even develop engines in-house, as the two British brands once did in the years before Ford's ownership.

"We have an agreement -- as in Jaguar Land Rover -- with Ford for the supply of engines to support the current model line-up," Eedle explained.

"Beyond that we're exploring a number of options -- and developing engines in-house is one such option, but that's as much as we can say."

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