Jaguar Land Rover Asks for Bailout. This is Nonsense.

Jaguar Land Rover, which sells swanky vehicles to affluent folks, wants a bailout of its own (Financial Times):

Jaguar Land Rover (JLR), which is owned by India’s Tata Motors, said…that government intervention in the industry was required. Help was needed to improve liquidity in the supply chain, support continued investment in carbon-reduction technology and stimulate consumer demand, the company said.

It declined to comment on reports in The Sunday Times that it was seeking £1bn in state assistance, saying only that it was talking to the government as part of industry efforts to win support.

David Smith, JLR’s chief executive, said at the weekend that there would be more significant job losses in the UK’s motor industry, among manufacturers, suppliers and retailers.

Despite that, JLR said on Sunday it was planning no further job cuts in the immediate future. “We think we’ve done enough for now,” it said. “It obviously does depend on how demand continues from here on. If it continues to fall and fall, it will be different.”

The JLR issue begs several points that are decidedly contemporary in nature:

1) JLR is owned by India’s Tata Motors, but is asking Britain for help. If the state agrees, it will effectively benefit an Indian company while stabilizing its own national economy. Why isn’t Tata’s company Tata’s responsibility? If the government steps in, will it demand some return from Tata? Britain’s national economy is at stake, but Tata, watching from a distance, could be the ultimate benefactor.

2) It is unnatural for a government to bail out a luxury brand.
I assume JLR’s pretense for asking for a bailout is that the banking crisis has made it difficult to operate. Understandable, but–the company sells luxury vehicles. Banking crisis or not, luxury brands shrink during recessions. JLR needs to adapt, continue to shrink, and be put up for sale again, if necessary. The government bailing out a luxury car brand when nobody can afford it anyway smacks of Russian oligarchy.

3) The bailout makes more nationalistic than economic sense.
I get the feeling that many proposed bailouts are more sentimental in nature than necessary.

Take GM. What if it fails? This has been discussed in detail in other forums, but there’s an unspoken X-factor: Foreign companies will take over vital economic machines. If this happens, profits go abroad, some say jobs disappear (I would dispute this point), and national government loses power. That’s the last thing a government wants.

On the other hand, bailing out means that government increases its power, companies maintain national ownership, and the ship stays afloat just a little bit longer. I have trouble believing that we’ll look back on this mess in 10 years and say “Remember how the bailouts saved us? Government was so wise.”

The more likely scenario will involve national bankruptcies, increased supranational oversight (an expanded IMF, for example), and mass corporate sell-offs to foreign entities. We’ll bicker about how Chinese companies have taken over our national treasures, but we’ll have food on the table.

This is not a new phenomenon. We’ve done it abroad many times before; now it’s our turn. The best avoidance maneuver would be to let companies fail and refocus resources on more promising industries–wave energy in Britain comes to mind–which the government can play a role in supporting.

Hanging onto carcasses isn’t going to get anyone very far.

  • Yay, Drea’s back! Welcome home.

  • Drea

    Lela, thanks! A whole two weeks without bickering about the economy, can you believe it? Actually, it went by like a flash…and it’s not like there’s any less to bicker about in the meantime :).

  • Let Jag and Rover crash and burnnnnnn. They’re not even domestic!

  • leo

    when one fails another will appear in its place, one that has a better product and at less a cost. The reason noone wants the auto industry to fail is because UNIONS run everything, its one big legal MAFIA. Do some research and you will see that the auto industry is largely unionized and thus workers make more money than they deserve, and pay a fee for making that earning due to the union. ITS REDICULOUS. If unions crash then many many millionairres will no longer be able to afford their mercedes benz.

    Notice how all GM and FORD execs travel in mercedes and other luxury cars, not even their own brand.

    In 10 years we will look back and think WHY DID WE LET BAILOUTS HAPPEN AT ALL! It is not going to save anything, all it does is give the current execs and investors run away with al the money that they can stuff into their pockets. In 10 years they will be gone (along with our money), and our economy will REALLY be gone. Everytime Bush speaks regarding these bailouts and says “IT IS IMPORTANT FOR OUR ECONOMY” BULLSHIT, its important for their fortunes, since many of them LOST all the NOTSOHARDEARNED dollars, they are now trying to steal as much money as they can. How come the bailouts keep adding up and adding up, citi baught out wachovia, WHY?!?!? NOW CITI NEEDS BAILOUT! THEY KNEW! THEY KNEW THAT THEY CANNOT AFFORD IT, but alas you scratch my back and i will scratch yours! Its retarded how they are playing all of us, lying to us ON TV, and getting away with it. EVEN OBAMA WILL NOT DO ANYTHING ABOUT IT, IF HE HAD ANY INTENTION OF NOT LETTING THE RICH STEAL MORE MONEY THEN HE WOULD NOT BE WHERE HE IS, HE WOULD HAVE NEVER BEEN ALLOWED TO BE THE DEMOCRATIC ELECT! LOOK AT RON PAUL, HE WOULD HAVE STOPPED ALL THIS BULLSHIT, AND WOULD HAVE CLOSED THE FEDERAL RESERVE, sure maybe the first 10 years would be hard… but then we would go up up and away as far as the economy, BUT noone wants that, because then its not the current generation raking millions into their pockets, but would be the NEXT GENERATION… who would want that? Especially when you and your buddies have the power to stop it and keep the cash flow into your pockets. They knew what they were doing when they first started to lend to people who couldnt pay, they KNEW THAT THIS WOULD HAPPEN< its the same as saying a heroin user wont be addicted… its just mind numbing stupidity… and criminality.

    Were all fucked, and the future is gonna be MUCH MUCH worse, its not terrorists we should be afraid of… its the people in ties and suits that are shown every day ON THE NEWS…especailly on CSPAN… “THEY ARE ALL CROOKS, but wearing a tie and working in washington DC makes them politicians and lobbyists. By the way, when everyone grows up and start to think with their brains and not just “we are the greatest country, or we are better than everyone else” and realize that we are all human and we all need to have accountability and transparency of everything related to government, is the day that the world really starts to move toward a great society. Oh and get your heads out of your asses and stop believing in the god fairy. Use that sunday to read a book OTHER than a religious text and maybe you will grow some brain cells and understand how the world works, and not just how you are being used as a PAWN.

    ggkthx nore

  • Note that while Land Rovers are sold in the US as luxury vehicles, they are workhorses elsewhere.

  • Perdu

    I agree with the comments here, why are we bailing out all of these sectors, evolution has shown that the weak will fall and be replaced by a younger stronger more agile group, in reality the mortgages, the savings, the jobs currently circulating in the western economy are false, created by a bluff by the money sector and now being supported by bluff in the goverment sector. it is only a matter of time until this bluff blown and the real reality kicks in, the reality is cash flow is king and currently most sectors do not have clash flow, stop delaying the inevitable and let the new world order commence!

  • Der Krobsen

    These environmentally-irresponsible oversized vehicles, with their often bullying drivers, will be totally not missed

  • It all comes down to BAD quality!

    As of today it looks like Jaguar was granted the bailout money. Once a business is going down, it rarely comes alive again, it’s just a matter of time. The government knows this and is only buying time to temporarily save the jobs of all the employees. Anyone that works for Jaguar should start looking for a new job now. Ford was smart to get out when they did, they saw it coming. The bailout is the governments way of saying…. “find a new job while I help the company temporary pay you. Let it be said and warned…. I will not help again, so take the extra time I am giving you to find a new job”. Okay, the government looks good for saving jobs but Jaguar still looks bad. What needs to happen is JAGUAR needs to look good again and the government is not going to help them there. According to Jaguars track record it doesn’t look good. I think they have had long enough time to produce quality automobiles and they still can’t. They just can’t get it together and probably never will. That’s what it all comes down to.

    The quality of Jaguar is what is killing the company. At times like this who the hell needs all the trouble and problems poor quality brings you. I will never buy a Jaguar again!