Jaguar Land Rover's CEO to retire. His successor will face many challenges
Posted January 30, 2020 3:02 p.m. EST
CNN — Wanted: a chief executive with cast-iron resolve to navigate falling sales, political uncertainty, an economic slowdown and changing consumer tastes.
So could read the job advertisement for Jaguar Land Rover CEO. Britain's largest automaker is hunting for a new leader after its current CEO Ralf Speth steps down this fall.
Speth will retire when his contract expires at the end of September, the company, a unit of India's Tata Motors, said in a statement Thursday. The search for his successor is underway, it added.
Speth will become the non-executive vice chairman and remain on the board of Tata Sons, the holding company for Tata Motors.
Whoever takes over will have the unenviable tasks of navigating the company through Brexit, getting it back on track in China -- the world's largest car market -- and weaning it off its dependency on diesel cars.
Each of these aspects are challenges in their own right. Taken together, they'll pose a tough prospect for even the most battle-hardened leader.
Fall from grace
Jaguar Land Rover enjoyed something of a reawakening under Speth, who led the company as CEO for 10 years. A German-born engineer, Speth spent 20 years at BMW where his last job was as vice president of Land Rover. He then joined Ford in 2000, the same year it bought Land Rover. In 2010, Speth became CEO of Jaguar Land Rover - a group established in 2008 when Tata Motors bought the brands.
He is widely credited with transforming the business from a largely domestic-focused firm to a global player rivaling the likes of Volkswagen and BMW.
"Ralf developed Jaguar Land Rover from a niche UK-centric manufacturer to a respected, technological leading, global premium company," Natarajan Chandrasekaran, chairman of Tata Sons, the holding company of Tata Motors, said in a statement.
Under Speth's leadership, Jaguar Land Rover opened its first factory in China in 2014, working hard to grow its share in the country's luxury vehicle market. That strategy paid off handsomely. The company's retail sales got off to a slow start but then soared in 2017 and 2018, capping off a stellar run in which the automaker reported eight successive years of sales growth.
But that success quickly evaporated. Sales slipped by about 6% and the group posted a record £3.6 billion ($4.7 billion) loss over the fiscal year ended March 2019, as carmakers grappled with a slump in sales to China for the first time in two decades.
Among its European customers, Jaguar Land Rover was also battling a shift away from diesel cars, the group's mainstay, in the wake of the Volkswagen emissions scandal.
In January last year, the group announced a drastic plan to cut costs by £2.5 billion ($3.3 billion), which involved shedding 6,000 jobs. It continues to plow billions of pounds into rolling out electric vehicles in order to respond to shifting customer preferences and tightening emissions regulations.
China and Brexit weigh on sales
These efforts appear to be bearing some fruit. The company said Thursday that profit in its fiscal third quarter ending December more than doubled to £318 million ($416 million) over the same period last year, when it recorded a loss of £273 million ($357 million). But it also announced additional spending cuts, and is now targeting £4 billion ($5.2 billion) in cost savings by the end of its 2021 fiscal year.
Alongside cost cuts, the company's incoming CEO will need to face the harsh reality of a car market in sharp decline, as demand plummets in China and India.
Sales in the United Kingdom, where Brexit uncertainty has hit carmakers, have also slowed. Cars manufactured in the United Kingdom last year fell to their lowest level since 2010, according to the Society of Motor Manufacturers and Traders (SMMT).
"Given the uncertainty the sector has experienced, it is essential we re-establish our global competitiveness and that starts with an ambitious free trade agreement with Europe, one that guarantees all automotive products can be bought and sold without tariffs or additional burdens," SMMT chief executive, Mike Hawes said in a statement.
The United Kingdom will leave the European Union on Friday, but the details of the pair's trading relationship still need to be ironed out by the end of this year.
Those details will matter a great deal to Jaguar Land Rover. The European Union accounted for a fifth of its retail sales for its most recent financial year and it relies on the market for a number of key components.
Perhaps unsurprisingly, Speth has been one of the auto industry's most vocal Brexit critics.
The company has previously cautioned that if the United Kingdom fails to maintain a smooth relationship with the European Union, it could wipe out more than £1.2 billion ($1.6 billion) of its annual profit.
Another relationship that matters a great deal to the automaker is the one between the United Kingdom and the United States, which accounts for about a quarter of its sales. The United States has threatened to impose tariffs on cars made in the United Kingdom if the country moves ahead with a tax on digital services.
All of this makes for a bumpy road ahead for Jaguar Land Rover's new CEO. It will be interesting to see who is up to the challenge.