Jaguar Land Rover plans to cut 5,000 of its 40,000 workforce in the UK, the Financial Times reported.
The UK luxury automaker, owned by India’s Tata Motors will outline the measures in January as part of a three-year cost-cutting program, the paper said, citing several unidentified people close to the company.
JLR has been hit hard due to trade tensions between China and the U.S., both key markets for the automaker, low demand for diesel cars in Europe and costs associated with Britain’s departure from the EU.
Tata Motors said in October that it plans to cut costs and improve cash flows at JLR by 2.5 billion pounds ($3.2 billion) over 18 months in a turnaround plan. Tata did not say how many jobs would be lost. JLR will first focus on cash saving "quick wins" such as reducing nonproduct investments and speeding asset sales, Tata said in an investor presentation.
Jaguar Land Rover declined to comment on the Financial Times report. "The company does not comment on rumors concerning any part of these plans," a spokesman for the company said by email on Sunday.
S&P Global Ratings cut Tata Motors’ long-term rating deeper into junk on Tuesday, the second downgrade in five months, citing headwinds for JLR in some key markets, including China. JLR’s euro-denominated bonds due in 2026 have fallen to about 84 cents on the euro since they were sold at par in September, according to data compiled by Bloomberg.
JLR is also bracing for the possibility of the UK exiting the European Union next year without a deal, threatening to disrupt auto-industry supply chains.
CEO Ralf Speth warned British Prime Minister Theresa May in September that a bad Brexit deal could put tens of thousands of jobs at risk and cost the company more than 1.2 billion pounds a year.
Investment advisers Evercore ISI said JLR needs to do more than cut costs, reduce capital expenditure and turn around its China business. "The company needs to consider whether it’s spreading itself too wide and whether competing with the Germans in the tough premium sedan segment is a viable strategy," it said.
JLR's problems include higher research and development spending relative to sales than other automakers and limited economies of scale, Evercore said in a note to investors on Monday.
Tata Motors bought Jaguar Land Rover from Ford in 2008.