Today, The Guardian published an article on how the Labour government has no plans to bailout JLR to avoid job loss.
I am sure many people will feel strongly on the topic, so I have tried to break it down as tactfully as possible.
Well from the perspective of the worker, it is horrific. There is no easy way to sugar coat it, redundancies cause harm to peoples lives, and many workers will likely struggle to find work in the current market.
However from the point of view from the business, it is the difference between bankruptcy and potentially remaining afloat. I think we can agree if there is to be job loss, then it should be as minimal as possible, and cutting jobs in the short term, could prevent massive job loss in the long term.
When a company is struggling with covering its expensives, its usually down to a few factors:
It is rarely just one factor, and usually all of them play their role.
Bailing out a company never actually solves a problem, its like trying to treat black mould in your home with a fresh layer of paint, but that mould will just continue to grow, you are just hiding the problem.
Government bailouts, is the exact the same. In the case of expenses being too high, or a competitor providing a cheaper product, a government bailout keeps an inefficient business in the market, this business will then continue to leech money from other successful businesses, and funnel it into a loss making industry. It is the rough equivalent of setting a wad of cash on fire.
In the case of demand, it gets worse. Demand allows us to gauge what consumers want, we all "vote" with our buying habits, for example, many people currently are refusing to buy Israeli goods due to the war in Gaza, and others are doing the same for US goods due to the war in Iran. By lowering the demand for a company's goods/services that we oppose, we can shift the market to produce what we want. So if the government comes along and bails out a company which isn't making a profit because the demand is too low, that being, people do not want the good/service they are producing, they are in effect, forcing the good/service onto us.
The best bit? They also hand us the bill in the form of higher taxation, or though public sector cutbacks. Government never pays for anything, only the population of the country do.
Let's examine a few issues JLR is experiencing.
According to World Population
Review
the UK is within the top 10 countries in the world for energy prices at
$0.40/KWh.
Manufacturing is strongly dependant on energy prices. The higher the cost of energy, the higher the cost of manufacturing each vehicle, which inevitably leads higher prices being passed onto the consumer.
This is linked rather well into the energy prices in the UK. China's energy
price using the same source is $0.08/KWh, ~80% cheaper than the UK.
Now take the US, another country which is big on manufacturing, their energy
price using the same source is $0.18/KWh, ~55% cheaper than the UK.
From energy prices alone, manufacturing in China is a mere fraction of the cost to manufacture it in the UK, and add in the cheaper cost of labour, the UK has little competitive advantage in the manufacturing industry today.
China can manufacture cars and ship them across the world for cheaper than we can manufacture them today. So its no wonder that last month The Guardian reported that Chinese car market share in Europe is still increasing despite the EU tariffs on China.
Cheaper cars mean lower cost of living for people in the UK, and more people being able to afford to drive. For people who live in rural areas, cheaper cars can provide a vital lifeline for those who are in low paid jobs, where there is little to no public transport to get to and from work. The less money low paid workers have to pay on their transportation, the more they can pay towards better quality food, clothing and housing.
At the end of the day the choice is yours. If you do not want to drive a Chinese car, you don't have to. But you will certainly pay a hefty premium to buy a car manufactured in the UK/EU today, what you must ask yourself, is it worth the cost?
Last year JLR was hacked causing them huge financial losses, which also had knock on losses to their partners within the market. Such a catastrophic cyberattack is very hard to recover from.
Now, the media was rather sympathetic towards JLR for the attack. But this is down to the public perception of cyberattacks that it is an unfortunately turn of events, like losing money on the horses, and almost give their condolences to JLR for being hacked.
In reality, a company being hacked is a failure on their part, nobody elses. Many companies try to cut corners when it comes to security and privacy, especially when it comes to data. Why pay extra for redundancy and disaster recovery when it could instead be paid out to the shareholders? Why pay for penetration testing, or for a full time security department? Why pay money to put staff through security training, such as learning to properly store passwords, rather than writing them on sticky notes?
The companies which properly invest into their security, remain out of the papers when it comes to data breaches, and those which are relaxed on security, and cut corners to save a few quid inevitably pay for it later down the line due to a cyberattack, data loss or their digital infrastructure failing.
Security has become so big, that for certain industries it has become a selling point. Higher prices, but with the promise of better security and privacy. Take for example, the boom in email providers over the past decade or so, for example, Protonmail which promises better privacy and security for both individuals and businesses.
So the next time you see a data breach on the frontline of a paper, do not feel bad for the company, as if they got really unlucky, but instead remember this is just another symptom of market failure, they failed to properly invest their money where it matters, and they paid for their mistake.
JLR mainly manufacture higher end vehicles. Jaguar was a sports car and luxury car company before merging with Range Rover. The issue with this is sport and luxury cars never really cared too much about efficiency, or emissions, it was always about being fancy, and looking classly. But with the recent push towards more efficient cars, which emit less, and towards EVs, has anyone asked whether petrolhead's want a luxury/sport car which is silent due to being an EV?
Moving onto Range Rover, a lineup of off road capable, rugged cars, which are rather popular in rural areas in the UK. However with the ever increasing price of fuel, and their limited target audience (mainly catering towards people who live in rural areas), more efficient, cheaper city cars which use less fuel are far more competitive in the current market.
So both sides of the JLR business are struggling to match the current demand in the market. The political controversy surrounding the rebranding of Jaguar as an electric car manufacturer surely didn't help either.
Within the same article from The Guardian, today:
"In 2024, the new Labour government under Keir Starmer agreed to invest
£500m in another Tata business, the Port Talbot steelworks, to build greener
electric arc furnaces. However, the investment did not prevent 2,500 job
losses at the south Wales site."
So the parent company has already had half a billion in subisides paid to it already to prevent job loss, to no avail. Why would paying subisidies to JLR be any different?
To further this:
"He [Jonathan Reynolds, Business Secretary] refused to rule out watering
down government targets for UK automakers to reach 80% zero-emission car
sales by 2030, which would lead to a ban on the sale of new petrol and
diesel cars by 2035, pointing to an open consultation on the issue."
"Carmakers and unions have lobbied hard for a slower transition, saying
the targets outpace actual customer demand."
So the government is already aware, that their intervention in the market is causing financial issues to car manufacturers in the UK, and the unions have correctly identified this, and have backed the car manufacturers knowing that the loss of the car manufacturer means the loss of work for union members, but yet the government still will not listen when they are being told by people who know the market, that their legislations are hurting the industry.
I hope I have proved that not only would a bailout actually cause further harm to the industry, and to consumer choice, but would actually be ineffective against protecting against job loss anyways.
If we really want JLR to survive, although personally I am a little biased and feel like they deserve to go under as I feel rather strong about cybersecurity failures, the government must stop talking about how it can subisidise or bail out business, but instead amend or repeal the legislation which is blocking businesses from being able to be competitive within the global markets.
Oh and also, please don't follow the EU with applying tariffs to any foreign goods which are more competitively priced than goods produced within the country/continent. Trade protection only leads to higher prices for the end consumer, which results in higher cost of living for us all.
Thank you for reading.