The rumours that DHL Supply Chain will be forced to make hundreds of its employees redundant as a result of Jaguar Land Rover’s cost control project illustrates the pressures on the automotive sector and the logistics service providers that support it.
A report in the Financial Times over the weekend outlined what it described as ‘Project Charge’, an initiative by JLR to reduce the cost base of the company, in part by shrinking its workforce of both permanent and contract staff. DHL Supply Chain has an unusually close relationship with JLR, providing line-feed operations as well as transport planning services. DHL staff work alongside JLR employees and in most UK plants are an important part of the labour force. If the rumours are true it will be inevitable that DHL Supply Chain will have to make substantial lay-offs.
In the short term, JLR’s problems are due to falling demand in its major markets, including China. However, this is has been compounded by the role that the collapse in demand for diesel engines and the bottlenecks caused by the need for new WLTP emissions test approvals have had. In European economies especially, many vehicle manufacturers now offer the wrong models for a market that has changed almost overnight.
The underlying issue is the shift in propulsion technology. For JLR, the iPace electric vehicle has been very successful and accounts for much of the company’s sales growth over the past year. The rest of its diesel dominated product line is struggling. JLR now faces the need to push out as many new hybrid and electric vehicles as it can manage. This will be an expensive process.
JLR is far from the worst hit. General Motors has just announced that it would shut six assembly plants in the US in order to release resources for electric vehicle development. Ford, which is under fierce pressure in Europe, is closing a transmission plant in France. These represent the beginning of a violent restructuring of production capacity.
As with DHL Supply Chain, the danger is that the logistics service providers will get caught in the middle. Faced with large scale restructuring at assembly plants, vehicle manufacturers may be tempted to squeeze their logistics supplier before making their permanent staff redundant, making them suffer disproportionately.
Source: Transport Intelligence, December 18, 2018
Author: Thomas Cullen
GLOBAL SUPPLY CHAIN INTELLIGENCE (GSCi)