But unions argue that last week’s LRX announcement hides unpalatable details, reports Alex Turner

THE decision by Jaguar Land Rover to build the Range Rover LRX at Halewood, a move that will create 800 jobs, has secured the Merseyside factory’s future for a decade.

It is clear that the future success of Halewood is tied in with the success – or otherwise – of the LRX, just as the future of the Midlands Jaguar plant will be jas inextricably linked with the success or failure of the XF and XJ models.

Prof Karel Williams, of Manchester Business School, agrees that the LRX could be a hit for JLR – but warns that the company needs to be able to convert rave reviews into mass sales.

JLR’s history will, he says, count for nothing if sales targets aren’t met.

“I think the LRX has a lot of potential,” he said.

“The problem is that if you have a company that’s been in decline for 30 years – which is true of Jaguar, for example, whose share has been completely taken over by German manufacturers – then the dealer network may be incapable of turning a good product into mass sales.

“That’s also the problem facing Alfa-Romeo, Saab and Lancia – and all those brands that have got a great past but have got issues more complicated than creating one interesting new product.”

Prof Williams has in the past said he believes high-volume car production in the UK may be doomed.

But he says the car industry could continue for a long time yet, particularly at premium brands such as Jaguar Land Rover.

He said: “I think that, like the middle-aged person with a grumbling health problem, it [the UK car industry] could carry on for a fair period of time.

“But Jaguar Land Rover is the last company in the UK with the ability to design, develop and produce a car from scratch through to the car running off the production lines.”

Analyst Howard Wheeldon said that he was unsurprised Halewood had escaped the Tata axe, as it was “a modern, efficient and very well invested plant with half-decent industrial relations.”

He said the LRX announcement was a clear sign that Tata was committed to the company – and its Halewood plant – for the long term.

He said: “This statement of intent by JLR, which is clearly supported by Tata Automotive, should be seen by all concerned as progressive – a big step forward to carving out a long term future and growth for the company – a leap forward to what boils down to investment for JLR’s future.”

HOWEVER, JLR’s announcement last Thursday was not met with universal approval. Union official Dave Osborne, Unite national secretary for the automotive sector, was among the most vociferous, saying: “I am seething – the more I read into this, the more angry I am.”

That was because, while the announcement that Halewood is to build the LRX Range Rover was excellent news for Merseyside’s car industry, there was plenty to cause concern for the wider UK industry.

JLR is to close one of its two plants in the West Midlands – it has said it will decide next year whether it is Castle Bromwich or Solihull that will close – but details around the terms and conditions of new employees and changes to pensions have caused consternation among the unions.

The company’s statement, under the heading of “Cost competitiveness for sustained growth” set out its plans for the years ahead.

It said: “As the company reduces engineering complexity for its new product range, West Midlands manufacturing will transfer from two plants to one by the middle of the next decade, improving efficiency and cost.

“Further cost reductions include pension restructuring, lower employment costs for new hires, and a focus on IT and business simplification.

“Volume growth, especially in emerging markets, combined with low-cost country sourcing, will also reduce variable cost. The entire package of measures does not envisage any compulsory redundancies.

“This plan of action will restructure the company and deliver positive cash and profits that are essential to re-invest in the business and secure its future.”

New employees will start on a salary 20% below the current starting salary level and the pension restructuring includes the closure of the final salary scheme.

From April, new employees will join a defined contribution pension scheme, while staff who are in the current scheme must choose between lower benefits or making higher contributions to maintain the existing level of benefits.

JLR chief executive David Smith said: “This is a plan that recognises the impact the economic collapse has had on our business, and at the same time the opportunities that lie ahead for these two great brands.

“We are confident that a new, more efficient and competitive structure, combined with future investment, will unlock the true potential of this business.”

The company has already responded to the downturn in the past year by cutting production by 100,000, axing more than 2,000 jobs, freezing pay and cancelling bonuses.

“This was not enough to offset the full magnitude of the downturn and the company swung from profit in 2007 to significant losses over the past 12 months,” he added. “This was not a sustainable situation. Actions taken have started to reverse the trend, quarter over quarter, and we now have to take the company to the next level of competitiveness.”

The firm said it would build a new generation of lightweight vehicles, with hybrids and electrification technology which it said would “significantly” reduce fuel consumption and CO² emissions.

About £800m has been dedicated to environmental innovation and the new plan includes building the Range Rover LRX, which the firm said would be the smallest, most fuel-efficient Range Rover yet.

While Unite welcomed moves to green the JLR product range, they reacted angrily to the planned changes to pensions and starting salary, saying it was not prepared to make concessions, and warned industrial action was a possibility.

Mr Osborne said: “Earlier this year, this company and our union agreed a framework agreement intended to support JLR through this tough economic period. Our members said then that JLR could not be trusted to uphold that agreement. This has proven to be true.

“In April, our members agreed to changes to terms and conditions of their employment in order to give the company financial security, but like Oliver Twist they are coming back for more. It appears that the company is making our members pay for their failure to secure government funding.

“We recognise the difficult trading environment for JLR, which is why Unite and its members have done more to help JLR during this recession than we have with any other company.

“Some of the problems the company faces today exist as a result of past management failures.

“These failures were at the hands of the same team who today want our members to lose their pensions.”

alex.turner