Abrupt exit of Bolloré may be a blessing in disguise for JLR

The news was surprising not only because the mild-mannered yet stern-looking Bollore has spent only two years in the company but also as his ambitious Reimagine plan for the two brands unveiled in February last year is still unfolding. Even the staunchest of the critics of JLR, who bemoaned the company’s non-committal even dismissive stance to electrification under Bolloré’s predecessor Sir Ralf Speth, had lauded the plan that talked about making Jaguar a fully electric brand by 2025 and a majority of the Land Rovers by end of this decade. It came laced with the aspiration to achieve double-digit margin by fiscal 2026, to become net debt-free by 2024 and completely carbon-neutral by 2039. What is not to like?

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Facts, however, do point that JLR, which had scripted a stunning turnaround under Speth in the early part of last decade but had begun to first stagnate and then struggle for growth in the latter half of it, remains deep in the woods. It is tempting but unfair to judge Bolloré’s two-year stewardship on the basis of the company’s performance — seven consecutive quarters of pre-tax loss. Black swan events like covid-induced supply-chain challenges and the Russia-Ukraine war of this year were unprecedented and have spared none. He inherited a company that was profitable but flaky — in his first full quarter at the helm, JLR had a positive balance-sheet with a strong 7.5 percent margin. Some of the troubles at the firm like the fallout of Brexit — nearly 60 percent of the production is in the UK — predate Bollore.

In many ways, his Reimagine plan carries forward Speth’s Charge and Charge+ revival plans that had resulted in savings of £6 billion between September 2018 and March 2021. Yet there is a difference in the overall vision. While Speth’s was more expansive — he aspired to sell over a million cars and truly compete with the German luxury car makers at some point — Bolloré’s is more realistic. The break-even threshold volume for Reimagine at 400,000 units is a third less than Speth’s 600,000 units when he embarked on Charge. In effect, Bolloré, who had written off a number of ongoing projects including the new XJ saloon and took significant losses as a result, had visualized a leaner, more compact and yet more profitable company.

Some of the more fundamental problems, however, were not addressed. For one, JLR is dependent on China — its largest market which accounts for nearly a quarter of its topline — more than its rivals. This puts it at a disadvantage in a region-specific negative event such as China’s zero-tolerance Covid policy which has seen frequent lockdowns affecting businesses.

The other big issue is the consistently poor performance of Jaguar which is the smaller of the two brands and doesn’t enjoy the distinct positioning of the SUVs from Land Rover. In 2021, Jaguar was still at less than half its peak annual sales of 2018 unlike Land Rover that has on a much higher base recovered 75 percent of its 2017 peak.

While the decision to push Jaguar first on the electric treadmill is inspirational, it is still not clear whether it is to be positioned as a rival to the saloons from BMW and Mercedes or to be pushed to the stratospheric levels where Porsche’s legendary sportscars reside.

Perhaps these are questions that Bolloré would have answered had he stuck around in times to come. There is no way of knowing that now. Instead, his departure opens up the possibility of selecting a fresh driver at the wheel who can be more radical and bolder. JLR is no longer at a crossroads where careful deliberations are required but on a serpentine, bumpy track that requires decisive and hard maneuvering.

Given the topsy-turvy nature of the company’s performance in the last few quarters, a pair of fresh eyes scrutinizing the projects it has undertaken would do no harm. Who knows the winning prescription could mean a renewed push on the path Speth and Bollore have identified with a few tweaks here and there or maybe an entirely new approach itself?

Only Bolloré’s departure has proffered such an opportunity and it comes with no guarantees. It is a job only for the courageous for if it starts to go downhill, it will also take with it Tata Motors — India’s largest automaker. After all, JLR accounts for over 60 percent of its revenues.

As the old adage goes, why fix a thing that’s not broken? So too it should be, why persist with something that’s not mended? Choosing the right successor would not be an easy task but it does present another shot at redemption.

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