UK union rejects JLR pay offer, moves towards strike

Tata-owned automaker had made its final offer of a rise of 3% for each of the next three years

A British union has rejected a final pay offer from Jaguar Land Rover and will ballot workers in the first stage towards possible strike action, a trade union source with direct knowledge of talks with the firm told Reuters on Friday.

Negotiations have been ongoing for weeks between the two sides and the Indian Tata-owned automaker made its final offer of a rise of at least 3 percent for each of the next three years linked to pension changes and a bonus system, the source said.

After years in the doldrums, Jaguar Land Rover has enjoyed a new lease of life since it was bought by Tata group in 2008, recording a 2013-14 pre-tax profit of 2.5 billion pounds ($4.02 billion), up from 1.7 billion pounds a year before.

The source said the union had not given the firm a specific figure that it was demanding but that the final offer was unacceptable given the automaker's strong performance.

"For a company making 10 million pounds a day in profits we believed it disgraceful that JLR would want to introduce a bonus system designed to hold back basic pay and make draconian cuts to pensions," the source said.

A spokeswoman at Jaguar Land Rover said negotiations had been taking place but that unions had voted to reject what the company considered to be a fair proposal.

"Our offer was based on a desire to appropriately reward our workforce for their contribution to Jaguar Land Rover's success whilst balancing the longer-term needs to deliver sustainable business growth," she said.

According to a document seen by Reuters at an earlier stage in the negotiations, the firm said it had to keep its expenditure down due to an increase in its volumes which had meant costs had risen making "margins uncompetitive".

Over 16,000 staff - including shop-floor workers, engineers and supervisors - will be asked at a ballot in mid-November whether to accept the company's final offer, which the source said was expected to be turned down.

Then a second ballot will take place which will most probably ask whether workers wish to strike, which the source said the union was "confident" would be approved.

Jaguar Land Rover built almost one in three of the 1.5 million cars made in Britain last year; the official opening of its sixth site, an engine manufacturing centre, is due to take place next week.

Workers were offered a 3.6 percent rise in the first year and either 3 percent or the Retail Prices Index measure of inflation plus 0.5 percent depending on which is higher in years two and three, the source said.

Pay is a key consideration in Britain ahead of a general election next year and as the Bank of England weighs up when to begin raising rock bottom interest rates.

Policymakers are watching for signs of a pickup in labour costs as they consider when to start raising borrowing rates. Earnings have failed to keep up with inflation for most of the period since the financial crisis in 2008.

Earlier this month, official data showed pay, including bonuses, rose on average by 0.7 percent in the three months to August, falling short of the 1.2 percent rate of inflation.

But with British car sales forecast to return to pre-recession levels of 2.45 million in 2014 and Britain expected to beat its all-time production high by 2017, unions are pushing for pay rises to reflect the buoyant market.

In September, Jaguar made efforts to broaden its appeal and take on bigger rivals such as BMW, Audi and Mercedes-Benz by launching its cheapest ever car, the XE sports sedan, aimed at women and young drivers.