Pressure to reduce cost and eliminate models increases as cost to finance the future increase:
Jaguar Land Rover Ratings Cut By Moody's, Citing China, Electrification
"........In a statement Thursday, Moody’s said it cut JLR’s corporate family rating to B1 from Ba3, with a negative outlook.
"The downgrade reflects Moody's expectation that leverage will remain elevated and free cash flow negative for fiscal years 2020 and 2021 as Jaguar Land Rover seeks to turn around performance in China, executes its restructuring program and continues to invest in its future model line-up including electrification", said Tobias Wagner, Vice-President and Senior Analyst at Moody's.
"The negative outlook further reflects the challenge to turn around financial performance in a subdued market environment and as other manufacturers also prepare to launch electric vehicles.........
.......“A potential acquisition of JLR has been speculated, but our analysis shows a much less favorable risk/reward profile versus the (Opel Vauxhall) deal. JLR’s operational performance materially deteriorated over the past two years and we estimate the cash burn was 1.2 billion euros ($1.4 billion) over this period,” Haissl said.
“Reducing or stopping the cash burn is more difficult, in our view, as JLR’s cost structure is close to benchmark levels. More meaningful savings can likely only be achieved by reducing the model offering, which should be possible even without a merger. Therefore, it is unclear if Tata Motors would even be willing to sell at the current, arguably depressed, valuation or if it believes the initiated turnaround measures will succeed.” Haissl said..........."
Point of comparison, JLR sold
589 D5's in the US for May2019. That's an annual rate of 7000 per year. The DII was selling ~20K per year.
