Losses at Jaguar Land Rover send parent Tata into red

Jaguar Land Rover (JLR) suffered from the continued slump in the automotive industry in the three months to the end of June, which drove parent company Tata Motors into a loss for the quarter. Yet the group is confident that with new funding and aggressive cost-cutting, it will be in a good position when the market returns to growth.

Tata, which bought JLR from Ford last year in a deal worth $2.3bn (£1.4bn), swung to a 3.2bn rupee loss (£41.6m) in its first financial quarter after posting net profits of 7.2bn rupees in the corresponding period in 2008.

The company – which said the figures were not strictly comparable as JLR's operations were only included for June last year – said JLR made a £62m loss for the quarter in 2009.

Sales at the subsidiary sank 52 per cent on a year ago, prompting Tata to blame "the continued adverse global automotive market conditions have resulted in an overall reduction in Jaguar Land Rover volumes during the quarter".

The business has taken steps to offset the level of stocking to bring it into line with retail sales. "The business is aggressively implementing cost-reduction initiatives to improve its profitability on a sustainable basis," Tata said. This included cutting 2,200 jobs, which reduced the workforce to 14,500, and securing a £340m loan from the European Investment Bank. This came as a relief to the company as it means JLR does not have to ask the British Government for loan guarantees.

Ravi Kant, vice-chairman of Tata, which is the largest vehicle company in India, said: "When volumes are down it is a challenge," before adding: "I have no doubt that JLR will be a very profitable company when the market starts to revive."

The group is banking on the success of its new Jaguar XJ, which launched in July and will go on sale next year. The "important new model" replaces an earlier XJ which was taken out of production in March.

JLR has opened its first showroom in India this year and also launched upgraded Range Rover, Range Rover Sport and Discovery 4 models, which will go on sale before the end of 2009.