Jaguar Land Rover (JLR) has said it will close one of its plants in the West Midlands after 2014 in a cost-cutting move that follows deep financial losses that have hurt Tata Motors' bottom line.
The firm is considering the closure of either its Castle Bromwich Jaguar plant in Birmingham or its Land Rover facility in Solihull.
There will be no job losses in the short term because of an agreement between unions and JLR, which is owned by Tata.
About 800 new jobs will be created at its Halewood plant on Merseyside, which will start building a new small Land Rover.
"This is a plan that recognises the impact the economic collapse has had on our business, and at the same time the opportunities that lie ahead for these two great brands," said chief executive David Smith.
JLR said it has a new business plan designed to increase its global competitiveness significantly, drive growth and sustained profitability, and respond to the challenges of climate change.
"The plan includes decisive actions to see through the next 12-18 months as markets recover and positions the company to grow and prosper in the future. It includes a new and expanded range of products and environmental technology, delivered through streamlined and competitive costs and a new manufacturing strategy," the firm said in a statement.
Tata chairman Ratan Tata has hired KPMG International and Roland Berger Strategy Consultants to advise on cost-cutting and said last month that JLR needs 'major cost reductions'. JLR losses have dragged parent Tata Motors' into loss this year.
JLR said it has already responded with 'aggressive actions over the past year' including production reduced by more than 100,000 units, employment reduced by 2500 and pay frozen and bonuses cancelled.
However, it said that 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'.
Land Rover has also confirmed today that a production version of its LRX concept crossover car will be built. The new car will debut next year and join the Range Rover line-up in 2011.
Designed and engineered at Land Rover's Gaydon facility, the new Range Rover 'will be the smallest, lightest and most efficient vehicle the company has ever produced' according to Land Rover.
The new LRX-based crossover will be built at Halewood, on Merseyside, subject to quality and productivity agreements and will be sold in over 100 countries around the world.
Phil Popham, managing director of Land Rover said: "The production of a small Range Rover model is excellent news for our employees, dealers and customers. It is a demonstration of our commitment to investing for the future, to continue to deliver relevant vehicles for our customers, with the outstanding breadth of capability for which we are world-renowned."
"Feedback from our customer research also fully supports our belief that a production version of the LRX Concept would further raise the desirability of our brand and absolutely meet their expectations," he added.
Last month, Tata announced that it had secured private funding for Jaguar Land Rover and would not need government support.
It had previously spent months negotiating with the British government for state funding, but the two sides failed to agree terms.
See also: Investment crucial for Jaguar's future