Supplementary memorandum submitted by
Unite the Union
SALE OF JAGUAR/LAND ROVER
1. INTRODUCTION
1.1. Over 12 months ago Ford's
senior management team were considering a sales package of Land
Rover and Jaguar as part of a shake up of the company's portfolio
of upmarket British brands. Those considerations came closer to
reality when UK politicians were briefed in June this year of
its intentions and Ford appointed investment bankers to investigate
the prospects for a sale. Now the company has moved to the final
stages of sale through its discussions with three shortlisted
bidders,—Tata, Mahindra & Mahindra and One Equity.
1.2. Unite is the major union recognised
by Ford Jaguar/Land Rover and has been involved in detailed discussions
throughout this process.
2. FACTORS
LEADING TO
THE DECISION
TO SELL
2.1. Last year Ford Motor
Company worldwide recorded losses of $12.7 billion. It has mortgaged
its remaining assets, (excluding Jaguar/Land Rover and Volvo,
its Premier Automotive Group, PAG), for $24 billion against which
it is able to finance losses in to 2009. The cost of borrowing
on this credit is enormous.
2.2. This situation has arisen primarily
through the collapse of the US Market where Ford has been experiencing
a decline in its market share over the last 10 years. Ford has
taken a decision to restructure its global operations to match
market share and this has already resulted in the closure of 14
plants in the US with the loss in excess of 50,000 jobs.
2.3. Competition from the
Japanese car makers has led to a strategic decision for Ford to
focus on its core products and remove itself from the premium
car business. Ford has also previously enjoyed the benefits from
the US truck market which has now been seriously damaged as a
result or rising oil prices and the consequential impact on US
fuel prices driving the business to switch to smaller cars. Earlier
this year Ford disposed of Aston Martin and has also sold its
Hertz Business. Whilst the company has stated that Volvo is not
for sale at this moment, Unite believes that this will depend
on the success of Ford's recovery plan in the global market.
2.4. The Committee should
also note that Land Rover will this year record its largest profits
ever of $1 billion and the forecasted aggregate profits for Jaguar/Land
Rover by 2010/11 is $3.3 billion. Given these positive projections
it is apparent how desperate the current cash position of Ford
Motor Company must be for them to proceed with this sale.
3. THE
LIKELY FUTURE
OF JAGUAR/LAND
ROVER
3.1. Unite has made clear
that its preferred option would be for Jaguar/Land Rover to remain
as part of Ford in a major global manufacturer in the industry.
However, Unite believes that the future of the UK plants will
depend heavily upon the ultimate purchaser if Ford decides to
proceed with the sale.
3.2. Tata has indicated strongly its intention
to stick with the existing Jaguar/Land Rover long term business
plan with additional investment going into new products and models.
It has given assurances to the union that it has no intention
of exporting jobs to India or elsewhere or doing anything that
could undermine the integrity of the brands. It has stated that
it would run Jaguar/Land Rover as an independent company and Tata's
record in similar ventures into Europe and the UK has suggested
that its approach would be a hands off one.
3.3. Mahindra & Mahindra,
with financial backing from Apollo (Private Equity firm), is potentially
the weakest of the three bidders in that the size of Mahindra
is smaller than Jaguar/Land Rover and its previous interest has
been focussed wholly on the Utility Vehicle market in India. Unite
would have concerns that this might have for the future of Jaguar.
3.4. OneEquity, whilst led
by former CEO of Ford, Jac Nasser, has made clear that its approach
is that of a transitional owner with a view to taking an independent
company to the stock market for flotation. Unite would have concerns
that this could lead to job losses in preparing the company for
a public flotation.
4. THE
IMPACT ON
R&D AND INNOVATION
IN THE
PREMIUM CAR
MARKET
4.1. Jaguar/Land Rover has
two R&D sites at Whitley near Coventry and Gaydon in Warwickshire.
All three bidders have said that they would retain these facilities
and have no plans to move R&D elsewhere. Tata has specifically
recognised that the technology and skills employed in the UK is
significantly superior to anything they have in their own organisation.
The UK has a No. 2 world ranking for premium car production and
the retention of Jaguar/Land Rover R&D and design facilities
is crucial to the success of this end of the automotive market
in the UK.
4.2. Unite is concerned that the initiatives
taken by the Advantage West Midlands (AWM) Premium Automotive
R&D (PARD) Programme aimed at enhancing the manufacturing
and design capabilities of automotive supplier companies particularly
in the Midlands, could be undermined were the area to lose key
R&D sites such as Whitley and Gaydon. It is therefore vital
that the sale of Jaguar/Land Rover does not lead to the loss of
these facilities.
5. THE
IMPACT OF
PUBLIC PROCUREMENT
DECISIONS ON
LAND ROVER
5.1. Current procurement policy
with regard to Land Rover ensures a significant sales outlet in
terms of Range Rovers to the Police and Defenders to MoD and Red
Cross. Whilst the volumes are not massive the high profit margin
of these vehicles means that any negative change in policy would
impact heavily upon company production and profitability. The
consequence of such a move would inevitably be a loss of jobs.
5.2. Unite has publicised recently the
results of its own research into public procurement in the automotive
industry which demonstrated that government could do much more
through intelligent procurement policies to secure jobs in the
UK car vehicle industry.
6. IMPACT
OF CLIMATE
CHANGE AGENDA
ON THE
PREMIUM CAR
MARKET
6.1. Unite is clear that the
climate change agenda has already had an impact on this market
and that this impact is likely to grow significantly in the future.
Currently the average CO2 emissions of Jaguar/Land Rover is 174
grams per km. The EU Commission is seeking to introduce a limit
of 130 grams per km in the future. Ford Motor Company is assessed
on its average emissions for the whole range of products and so
the lower emissions of its main products help offset the high
levels of premium models.
6.2. Once Jaguar/Land Rover becomes a
stand alone company this offset protection is lost and there is
no way that it could ever meet the new target being demanded by
the EU Commission. Unless governments are prepared to recognise
this and negotiate a different tariff, with built in targets for
gradual reduction, for the premium car market, Unite believes
that this segment of the automotive industry will be killed off
completely.
7. WHAT
CAN GOVERNMENT
DO TO
ENSURE THAT
HIGH VALUE
ADDED MANUFACTURING
SUCH AS
LAND ROVER/JAGUAR
REMAINS UK BASED
7.1. 19,000 UK jobs are directly
at stake with the sale of Jaguar/Land Rover, with a further 40,000
jobs dependent on the company. Unite expects the government, in
line with its own manufacturing strategy, to recognise the strategic
importance of such a company to the UK economy both in terms of
the high skilled jobs it provides and also by virtue of the contribution
it makes to the R&D and innovation base of UK manufacturing.
7.2. In the short term, government should
protect taxpayers' money that has been rightly ploughed into the
company over the years and consider taking an equity share in
the company. Jaguar/Land Rover is without doubt a manufacturing
champion within the UK Automotive industry and the UK government
should ensure that its recently announced manufacturing review
addresses the long term strategic needs of the UK manufacturing
base.
7.3. Government did not shirk
its responsibilities when it invested £24 billion in Northern
Rock to ensure its survival, Unite believes that it would be money
well spent if similar action was taken to underpin the future
of Jaguar/Land Rover.
7.4. The Committee is also
reminded of the original evidence submitted by Unite on the key
factors that must be addressed to ensure the retention of higher
added-value jobs such as those at Jaguar and Land Rover.
December 2007
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