Land Rover has returned to profit for the first time since it was bought by US-based Ford Motor four years ago, the Financial Times (FT) said, citing new UK accounts filed by the offroad vehicle specialist.
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The FT said the small profit last year has helped give the manufacturer, sold by BMW for €3 billion in May 2000, the confidence to inject more than £100 million into its under-funded pension fund.
But the paper noted that the return to pre-tax profitability comes as Land Rover’s 8,000-strong workforce is being asked to accept sweeping changes aimed at improving productivity and quality.
Land Rover reportedly said the profit followed the re-launch of the Range Rover luxury off-roader last year, which helped spark customer interest. Profit margins on top-of-the-line vehicles are far higher than on cheaper models, the FT noted.
“We are anticipating further improvement with the imminent launch of the new Discovery,” the company reportedly said.
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By GlobalDataAccording to the Financial Times, the company also benefited from severe cost-cutting, part of the legacy of David Thursfield’s time as head of international operations at Ford, before he was forced out earlier this year. Non-production costs, such as distribution and running offices, reportedly were reduced by £54 million, or almost 20%, last year, while the cost-cutting more than offset a rise in interest payments as the company continued to borrow in order to invest in new model development.
The pre-tax profit of £7.9 million, which the Financial Times said was revealed in a filing to the UK’s Companies House two weeks ago, excludes the small profit made by the import company in the US, which is shown in Ford’s accounts. The previous year, Land Rover had pre-tax losses of £5 million, while in 2001 – the first full year under Ford ownership – the off-road vehicle manufacturer lost £302 million, the paper added.
The FT said the accounts also reveal that Land Rover added £101 million to its pension scheme in two payments in January and April, in an attempt to plug the hole in the fund, using money thought to have been borrowed from other group companies.
At the end of last year the pension scheme had a deficit of £264 million – almost a quarter of its total liabilities – in spite of an increase in the company’s contributions to 16.5% of salary, the second increase since Ford took over, the Financial Times said. Land Rover reportedly refused to say if further cash injections would be made.
The paper noted that trade union leaders at Land Rover’s Solihull factory are meeting Mark Fields, who heads Ford’s PAG cluster of luxury marques, including Jaguar and Volvo, on Tuesday to present a plan for improved productivity and quality.
According to the Financial Times, the plans has been agreed provisionally by unions and local management, but must be passed by Fields, who has threatened to shut the factory if it cannot match quality standards at Jaguar in three years’ time.
