JLR to take a write off of 1.5 bn pounds in Q4 as part of a restructuring

Jaguar Land Rover will take a one-time write off of 1.5 billion pounds (includes cash and non-cash) in the March quarter as part of a restructuring exercise under “Re-imagine” strategy. This will be the second biggest write-off by Tata Motors’ UK subsidiary as it seeks to change tack and turn profitable amid disruptions and heightening competition.

JLR had taken a write-off of 3.7 billion pounds in the December quarter due to a slowdown in China and Brexit uncertainties. The company attributed the “exceptional one-time” non-cash write down of 1 billion pounds to “higher previous spending and certain planned products that will not be completed.” It will also take a hit of another 0.5 billion pounds (cash write-off) on account of the restructuring costs. JLR expects to offset this cost by a positive cash flow in FY22.

Meanwhile, it will prioritize profitability over market share and volumes and will bring only those models that are margin accretive. It would adopt a “more focused” product portfolio and reduce annual spending to about 2.5 billion pounds. In the works is rationalization of the architectures with three new electric first architectures including Modular Longitudinal Architecture, Electrified Modular Architecture and Pure Battery Electric Vehicle platforms. The Reimagine strategy crafted will focus on increasing the company's share in the most profitable segments. JLR expects to be cash flow positive by FY23 and start generating net cash by FY25. Meanwhile it will realise the full benefits (£ 6 billion) of Project Charge by the end of March quarter. JLR has managed to bring down the whole sales break-even volumes from 600,000 in FY19 to 400,000 to 450,000 units now. The move will help the company withstand the cyclicality in sales and boost margins.

Source: Business Standard