JLR is launching a modernized version of its Land Rover Defender later this year. Photographer: Simon Dawson/Bloomberg
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Moody’s Investors Service downgraded some debt ratings of troubled maker of luxury SUVs and sports cars Jaguar Land Rover (JLR) because of its continuing troubles in China and worries about the huge amount of capital required to fund electrification.
JLR is based in Britain and owned by Tata Motors of India.
JLR reported a loss of $4.6 billion for its financial year ended March 31.
JLR has said it was cutting 4,500 jobs as part of a turnaround policy. In November last year JLR announced a plan, “Charge and Accelerate”, to slash $3.2 billion in costs over the next 18 months. As JLR stumbled, reports gathered pace that Tata Motors would seek to sell it, with PSA Group of France the likely bidder. But Tata has fiercely denied the plan.
In a statement Thursday, Moody’s said it cut JLR’s corporate family rating to B1 from Ba3, with a negative outlook.
“The downgrade reflects Moody’s expectation that leverage will remain elevated and free cash flow negative for fiscal years 2020 and 2021 as Jaguar Land Rover seeks to turn around performance in China, executes its restructuring program and continues to invest in its future model line-up including electrification”, said Tobias Wagner, Vice-President and Senior Analyst at Moody’s.
“The negative outlook further reflects the challenge to turn around financial performance in a subdued market environment and as other manufacturers also prepare to launch electric vehicles. Risks regarding a potential “no-deal Brexit” or potential U.S. tariffs also remain.” Wagner said.
In a report earlier in June, Berenberg Bank of Hamburg, Germany, doubted there would be a bid for JLR because its cost structure was already close to benchmark levels. PSA Group bought General Motors European subsidiaries and chronic loss-makers Opel and Vauxhall, and turned them into profit-makers by cutting costs .
