Call it Apple syndrome. The ripple effect of a slowdown in China’s economy is hitting more Western companies, with British luxury automobile maker Jaguar Land Rover the latest to feel the pain.
The car giant owned by India’s Tata Motors 500570, +0.82% is cutting 4,500 jobs in Britain after blaming a slowdown in the Chinese economy for plunging demand.
It comes just days after iPhone maker Apple AAPL, +0.32% blamed weakness in the People’s Republic for worse-than-expected holiday sales numbers.
In one of the worst days for Europe’s automotive industry, Ford F, -0.52% also announced a plan to lay off thousands in its European operations in an attempt to return the business to profitability.
The health of global automobile makers is seen as a barometer of the strength of world economies, and this double shock is a blow to Europe on its unsteady path to recovery.
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Jaguar Land Rover, Britain’s largest car maker, which employs 40,000 in the U.K., reported on Thursday a 4.6% drop in full-year sales to just under 600,000 vehicles.
The Tata unit has been battling a raft of problems, some self-inflicted, which included an overdependence on demand in China, according to some analysts.
The People’s Republic had once been one of its strongest markets, but a dip in consumer confidence and the resulting economic slowdown saw demand in China fall by 21.6% for the year, the biggest drop of any of its markets.
Jaguar Land Rover’s chief commercial officer, Felix Brautigam, said, “The economic slowdown in China along with ongoing trade tensions is continuing to influence consumer confidence.”
The Chinese economy has enjoyed years of expansion, but attempts to bring its groaning debt under control and the trade war with the U.S. are taking a toll. When growth figures for 2018 are revealed, they could be the worst since 1990.
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It spells an uncertain year ahead among companies depending on the world’s second largest economy for trade.
Shares in luxury goods firms Burberry BURBY, -2.65% BRBY, -2.68% fell by more than 5% on the day Apple issued its profit warning, and smaller rival Mulberry MUL, +0.33% slipped 3.5% and French luxury giant LVMH MC, -0.92% lost 2.8%. In America, Ralph Lauren RL, -2.33% dropped 3.2% and Tiffany & Co. TIF, -1.76% was down 4.2%.
Many of the major car makers are also heavily dependent on the People’s Republic, with Volkswagen VOW, -0.81% , BMW BMW, -0.58% and Daimler DAI, +0.45% most exposed.
But JLR’s problem extend beyond China. It had hoped its Jaguar XE would do better than it has in a battle with BMW’s 3 Series, and banked its future on a clean diesel engine.
Last year JLR said diesel accounts for 90% of its sales in the U.K. and 45% of global demand, at a time when demand has tanked in the wake the 2015 Volkswagen emissions cheating scandal.
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For some time, it has been trying to fix fundamental issues with its business model. On Thursday it outlined the next phase of its “Charge and Accelerate” transformation program, which is aimed at delivering £2.5 billion, or $3.2 billion, in cost reductions over 18 months.
Chief Executive Ralf Speth said that “Jaguar Land Rover is expanding a business-wide review aimed at reducing the size of its global workforce by around 4,500 people.
“This is in addition to the 1,500 who left the company during 2018. The next phase … will begin with a voluntary redundancy programme in the UK. This strategic review will create a leaner, more resilient organisation with a flatter management structure.”
Tata has boosted its workforce at new plants in China and Slovakia in recent years.
Ford separately said on Thursday that it would cut thousands of jobs in Europe, exit unprofitable markets and discontinue loss-making vehicle lines aimed at improving profit margins.
Up to 4,000 jobs are at risk in the U.K. at the Detroit-based company, which has approximately 53,000 employees in Europe. It announced plans to combine the headquarters of Ford U.K. and Ford Credit in Essex, England.
It has struggled with a tired lineup of models and shrinking market and will review its operations in Russia and exit multivans.
Steven Armstrong, group vice president and president for Ford’s Europe, Middle East and Africa region, said: “We are taking decisive action to transform the Ford business in Europe. Our new strategy will enable us to deliver a more focused lineup of European-built passenger vehicles … for a healthier and more profitable business.”
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