Ralf Speth presided over the longest profit streak in Jaguar Land Rover’s history, but he also pushed an aggressive growth plan that overstretched the company just as it was hit by powerful headwinds.
When Speth took over in 2010, Jaguar Land Rover was fresh from its purchase by Tata Motors from Ford in 2008. JLR was “more or less bankrupt” when Tata took over, Speth said in a speech in 2014.
Speth, 64, who will retire as JLR CEO in September, was the most high profile of a number of executives hired from BMW. With Land Rover’s SUVs and Jaguar’s sporty sedans, Speth was able to capitalize on two trends: global demand for off-road-capable models and China’s fast-rising car market.
At one point, JLR was making £60,000 ($78,662) of profit on each of its luxury Range Rover SUVs sold in China, Max Warburton, an analyst at Bernstein Research, estimated.
Its profit margins were the envy of the industry, reaching 11 percent in 2011 and maintaining double digits through 2015.
JLR’s success convinced Speth it could be repeated at a much greater scale.
Speth is outwardly reserved, but his ambitions for JLR displayed his quiet confidence.
The company quickly formulated plans to produce its own range of engines in place of Ford-sourced units. It plotted global manufacturing expansion, first in China and then Slovakia. It even set up a Brazil CKD operation to bypass tough import taxes.
Under plans to revive the Jaguar brand, Speth approved a new rear-wheel drive aluminum platform with the goal of finally matching BMW sedans for dynamics. It achieved that, but customers for XE and XF models proved hard to come by.
In another expensive investment for Jaguar, Speth gave the go-ahead for the I-Pace full-electric crossover on a unique platform. Against all odds, Jaguar managed to launch it ahead of rivals from the German premium brands.
But when the Chinese profit engine sputtered in 2018, Speth’s expansion plan left JLR vulnerable. Capacity constraints quickly moved to overcapacity, right about the time contract manufacturer Magna Steyr started to build the I-Pace and the Jaguar E-Pace SUV in Graz, Austria.
But it wasn’t just China. JLR’s reliance on SUVs hurt sales after the sudden collapse of diesel in Europe. Around the same time, the Brexit vote and subsequent political uncertainty shook consumer confidence in the U.K., further damaging sales.
In the fiscal year ending March 2019, JLR’s winning streak ended in spectacular fashion: The company posted a £3.6 billion full-year loss following a £3.3 billion write-down on investments.
Was this Speth’s fault? He would have needed a powerful crystal ball to predict all of the global headwinds that hit JLR. Arguably JLR’s biggest mistake was investing in its own range of not just four-cylinder but also six-cylinder engines just as electrification was about to render powertrain differentiation obsolete. Analysts warned JLR about that at the time.
But Speth’s greatest legacy could be the write-down and the months that followed it.
After the bitter pill was swallowed, he helped secure a partnership with BMW on engines and electric powertrains. He cut costs beyond the tough targets he set and took painful decisions to reduce China volumes and focus only on profitable sales. He also pinned the company’s model strategy on one platform with the flexibility to accept any powertrain.
It looks to be working. JLR last week posted a pretax profit of £318 million in the three months ended Dec. 31, compared with a £273 million loss a year earlier. The company said its Project Charge turnaround plan resulted in cost and cash-flow improvements of £2.9 billion, exceeding the £2.5 billion target three months ahead of schedule.
The company is still saddled by expensive decisions made in the boom times, but Speth might have just secured the company’s future as it moves into the costly world of electrification.
Tata Motors has formed a search committee to identify Speth’s successor. Tanker giant Maersk’s former CEO, Hanne Sorensen, has been suggested as a possible replacement to Speth, the Financial Times reported.
Speth will become JLR’s non-executive vice chairman and will remain on the board of Tata Sons, the holding company of Tata Motors.