The move will shorten the 30-40 days it has to wait for between producing cars and delivering them.
GE Capital today signed an agreement with Jaguar Land Rover, the UK-based subsidiary of Tata Motors, to provide a working capital facility of up to £170 million for a five-year term.
The move will boost working capital within the company by shortening the 30-40 days gap the company has to wait between producing cars and delivering them to over 90 countries.
In a media release, GE Capital said the facility represents an innovative structure to finance JLR finished vehicle stocks between the points of production and onward sale to dealers on a revolving basis, as 90-day working capital.
“This is the first time that we are aware of in Europe, that a facility has been created to leverage this part of the distribution cycle and is demonstrative of how our pan-European asset and structuring expertise can truly benefit our customers,” said Rich Laxer, EMEA (Europe, Middle east and Afirca) President & CEO for GE Capital
This working capital loan will come as an additional support to JLR’s financial requirements, strained since the global economic slowdown over the past two years. Sluggish global demand for premium and luxury cars, which are JLR’s forte, led to the Midlands-based car maker seeking financial support from all possible sources within Europe and India.
Earlier last month, JLR had announced that it had secured a £175 million (Rs 1,300 crore) line from State Bank of India, over and above the $90 million (Rs 420 crore) committed export financing facility with ABC International Bank. In all, the company has raised nearly £670 million of new facilities this year, including those from SBI and ABC, and those secured earlier in the year from Standard Chartered Bank, Bank of Baroda, and Burdale Financial Ltd, a subsidiary of the Bank of Ireland, and now from GE Capital.
This also means JLR has raised twice as much funding as it had originally planned to within Europe, when it had managed to get approval for a £340 million loan from the European Investment Bank (EIB). However, it was unable to access this loan as it failed to get the UK government’s guarantee, which was a pre-condition by EIB to get the funding through. In August, JLR said that it would go ahead with its fund-raising plans without the support of the UK government and has since managed to secure twice as much loan as the UK government’s guarantee would have ensured.
Securing additional financial support is only part of JLR plans to claw its way out of the current recession. The company is moving ahead with fresh investments in the development of new models, including a new lightweight sedan, sports cars and sports utility vehicles and “electrification technology” (to produce hybrid cars). This Tata Group company also plans to rationalise its production, by closure of one its united, without any compulsory job losses, by 2014.
Over the past year, production in JLR was reduced by more than 1,00,000 units; spending and costs were cut, jobs reduced by 2,500, pay frozen and bonuses cancelled. “But this was not enough to offset the full magnitude of the downturn and the company swung from profit in 2007 to significant losses over the past 12 months. This was not a sustainable situation. Actions taken have started to reverse the trend, quarter over quarter, and we now have to take the company to the next level of competitiveness,” an earlier statement from JLR had said.
