LONDON • Jaguar Land Rover (JLR), reeling from a US$4 billion (S$5.4 billion) writedown, a slump in China sales and uncertainty around Brexit, said conditions are not right for it to borrow from the bond market and that it is seeking alternative funding.
The luxury carmaker needs to raise US$1 billion within 14 months to replace maturing bonds while feeding an investment programme for electric cars that is burning through cash.
To support its needs, JLR could increase a receivables facility or turn to other bank financing, with further options including leasing assets and tapping export credit, treasurer Ben Birgbauer said in an interview.
JLR's owner, Tata Motors, shocked investors last Thursday when it revealed the extent of the problems its British arm is having in China. Sales of Jaguar sports cars and Land Rover SUVs dropped 35 per cent in the world's biggest car market in the nine months to Dec 31, sending the unit to a £273 million (S$480 million) loss and knocking as much as 30 per cent off Tata stock.
"Market conditions are less favourable in general and our bonds are trading below par, reflecting our recent financial performance," Mr Birgbauer said. "We have always said we monitor the debt market and look to issue debt when market conditions are more favourable."
Britain's biggest carmaker is slashing 4,500 jobs, or about 10 per cent of the workforce, as it responds to slowing sales. That is on top of the 1,500 people who left the company last year. The measures will trigger a one-off charge of £200 million in the current quarter.
One major problem facing JLR in China is an ineffective dealer network, according to a presentation from the British business. Only 18 per cent of outlets are in so-called tier-one cities like Shanghai and Beijing, and more than one-third have been open for three years or less.
The company now plans to overhaul the operation, cutting back on deliveries to reduce stock and investing in measures to boost its brand, logo and slogans.
JLR says it can still grow global sales in fiscal 2020 with the help of other markets and the launch of revamped Range Rover Evoque.
Prior to last week, concerns about JLR's performance had centred on the impact of Brexit and a government clampdown on diesel-powered vehicles in depressing British car sales.
Royal London Asset Management had already reduced its exposure to JLR in response to "Brexit-specific risks and their ability to maintain access to the financial markets", said head of global high yield Azhar Hussain.
BLOOMBERG
