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November 11, 2019 05:36 AM

Jaguar Land Rover warns of car shortage after Brexit production shutdown

Nick Gibbs
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    LONDON -- Jaguar Land Rover's Brexit-related production shutdown at its UK plants will leave the automaker short of cars to sell in its current financial quarter.

    The week-long shutdown, which started Nov. 4, was planned to offset any potential disruption of parts supplies if the UK left the European Union on Oct. 31 without a trade deal. The EU gave the UK an extension to Jan. 31.

    The shutdown will cost JLR the production of 12,000 cars, Adrian Mardell, chief financial officer, told financial analysts on an Oct. 31 earnings call.

    Mardell said the automaker will build just short of 120,000 cars in the current quarter. "That’s much less than we expect to retail in the quarter," he said.

    Mardell said inventory "will be very, very thin" in the quarter and warned of "further disturbance" in the quarter after that.

    JLR's cut in production comes after it took steps to reduce its dealer inventory, especially in China, where falling sales contributed to a  3.6-billion-pound (4.2-billion-euro) loss in its last financial year.

    The company has posted profits for the last two quarters, helped by stabilizing sales in China, cost-cutting and a strong demand in the U.S.

    Mardell said that he expected JLR to remain profitable through the second half of its financial year to give a profit margin range of 3 percent to 4 percent for this year and the next.

    Mardell said the continuing threat of a no-deal Brexit was "the only significant risk we have out there that is live and real and potentially imminent."

    He said if JLR has to temporarily close plants after the UK quits the EU on Jan. 31 "that would then start to impact the year's results."

    JLR has three plants in the UK from which it exports cars worldwide. It also has an engine plant in the UK.  The automaker's plants in China and Slovakia were unaffected by the Brexit production stop.

    JLR had no choice but shut plants for a week, CEO Ralf Speth told reporters in September.

    A "hard" Brexit on Oct. 31 would have caused major disruptions at ports in the UK and continental Europe.

    Speth has previously warned that the wrong Brexit deal would cost the UK car industry "tens of thousands" of jobs.

    Car production in the UK fell 16 percent in first nine months to just under one million cars, according to the SMMT industry association.

    BMW went ahead and shut its plant in  Oxford, which builds the Mini, on Oct. 31 and Nov. 1, a decision made before the UK's since postponed decision to leave the EU.

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