Jaguar Land Rover is a rich company – it can pay to support its own supply chain | Nils Pratley

Here are a few principles to keep the government in mind, as the car component hit by the cyber attack in the Jaguar Land Rover to support the suppliers to support the suppliers.

First, JLR is a large and rich company that their suppliers directly support him – in fact, he will usually have a contract -based obligation to do so. Secondly, because their relations with JLR are indirectly, it should be for firms that are exposed to more. Third, even in the second case, there is a fair argument that ministers should try to arrange JLR strongly to get the final bill. As a result, a goal is to ensure that JLR returns to the final production is as smooth as possible.

Financial context is important. JLR is not a sick corporate poor, who is a danger of ending in a trench. India’s main subsidiary of Tata Motors and $ 2.5 billion last year made profit before tax. Profits are not the same as ready -made cash for use in a crisis, but Tata Motors’ first quarter trade declarationOn August 8, JLR, which was released a few weeks before the cyber attack, showed a cash balance of £ 3.3 billion. When combined with a £ 1.7 billion -revolving credit facility, the total liquidity was placed in £ 5 billion.

With any stretch, this amount must be sufficient for JLR to support their suppliers directly, the number of approximately 700 companies. The biggest will will have enough liquidity to wait until the crisis is over, to make JLR allegedly allegations of contract for the deduction of their business. For those who need money immediately, as the company knows, it is on JLR to find it.

The cyber attack probably will cost billions of pounds, as the Covid Pandememi does, but partly in this sector, capital buffers must be large. Sudden crises are unknown. It lacks financial motivation to support JLR’s direct supply chain. It needs to restart to run to run without removing – it was pushed to October 1 and probably only in the beginning.

Therefore, the government’s focus should be sprinkled among indirect materials. The great danger is a permanent damage to the component industry that may arise as a deduction of production in other manufacturers presented by the same base. The fragmented nature of the supply chain complicates issues. So is the timely delivery model. So is the fact that the automobile industry in Europe suffers from weak demand and excessive capacity.

However, there is still a reasonable situation for the intervention targeted by the government as a way to reduce the risks of sprinkler in the supply chain. Already there is enough evidence that the workers have been temporarily dismissed and that the entire industry has slowed down.

As reported by ITV, the idea of ​​buying parts to sell parts to JLR when the government is restarted from suppliers is interesting. The design comes in detail: it is not simple to be among them in a complex supply chain. On the plus side, the government would have some real assets, workers will be working, and JLR would be in the hook to buy parts when needed. As such an arrangement really shows the Covid experience, it can be preferred to the distribution of blankets of loans that do not always return.

However, the government is expected to help JLR and the company exercise support between the wider supply chain. Unfortunately, cyber attacks that have become a risk of doing business cannot be expected to be under the costs. JLR has financial resources that will help him directly to support his suppliers. There must also be an obligation to contribute to the indirect supply base.