Jaguar cuts 300 jobs and sounds the death knell for the X-Type

Economic downturn brings Jag's attempt at mass market to an early close

Jaguar Land Rover is cutting another 300 jobs at its Halewood factory and will stop producing the smaller "X-Type" cars at the end of the year.

The company is blaming "on-going weakness in the market" for the decision. Alongside the 300 voluntary redundancies, there will also be three weeks of non-production at the Merseyside plant between September and December.

David Smith, the JLR chief executive, said: "Our industry has been especially badly hit by the recession. Ceasing production of the X-Type, with further redundancies and temporary shutdowns, is necessary to protect our other investment plans."

JLR's sales have dropped by 28 per cent since September – and 2,200 jobs have already gone – after the recession blew a hole in the global car industry. Talks with the Government about assistance have been taking place since January, but Lord Mandelson, the Business Secretary, says help should come from Tata Motors – JLR's Indian parent company that bought the group for £1bn last March. More recently, JLR secured a €340m (£292m) loan from the European Investment Bank (EIB) under the UK government's own Automotive Assistance Programme. However, the loan needs a guarantee from Westminster and JLR says the Government's terms are untenably harsh.

The X-Type, or "Baby Jag", was known to be coming towards the end of its life, but production was expected to run well into 2010. The decision to bring the end-date forward cannot be laid entirely at the Government's door, but it is understood that the extra funding might have allowed it to run its natural course.

Any further measures the company may take is also dependent on the talks. Mr Smith said: "Further actions will be determined by the state of the market and the speed with which the EIB loan can be drawn."

The end of the X-Type is a major strategic move for JLR because it was the group's only shot at a mass-market vehicle, says Garel Rhys, at Cardiff Business School's Centre for Automotive Industry Research. "The die is now cast for this company to be a lower volume, but higher margin, producer," he said. "It means the end of attempts to make Jaguar a semi-volume brand in the way that BMW and Mercedes are."

The big question is what happens to Halewood without the X-Type. JLR says the future of the plant is secure because Land Rover's top seller, the Freelander, is made there, and neither of the other two factories, at Castle Bromwich and Solihull, has the capacity to take over.

But commentators have major reservations about the company's overcapacity. "When you take the X-Type out, it leaves JLR as a very small company," Hilton Holloway, the associate editor of Autocar magazine, said. "Three is simply too many for a company that doesn't add up to more than 300,000 cars per year."

But closing any down will be tricky because, in comparison with rivals such as Mercedes and BMW, JLR uses an unusual number of different "platforms" – or sets of parts. "JLR is in a tough position: it has too many factories, but streamlining its range is very difficult because they are all so different," Mr Holloway said.

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