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Sixty-Seventh Annual Report 2011-2012
pension liabilities are generally funded and the pension plan
assets are particularly significant. As part of its Strategic Business
Review process, the Company closed the Jaguar Land Rover
defined benefit pension plan to new joiners as at April 19,
2010. All new employees in the operations from April 19,
2010 have joined a new defined contribution pension plan.
Lower return on pension fund assets, changes in market
conditions, changes in interest rates, changes in inflation rates
and adverse changes in other critical actuarial assumptions,
may impact its pension liabilities and consequently increase
funding requirements, which wi l l adversely affect the
Company’s financial condition and results of operations.
Automobile financing business:
The Company is subject to
risks associated with its automobile financing business. Any
defaults by the customers or inability to repay installments as
due, could adversely affect the business, results of operations
and cash flows. In addition, any downgrades in the Company’s
credit ratings may increase the borrowing costs and restrict
the access to the debt markets. Over time, and particularly in
the event of any credit rating downgrades, market volatility,
market disruption, regulatory changes or otherwise, the
Company may need to reduce the amount of financing
receivables it originates, which could adversely affect the ability
to support the sale of vehicles.
Further, Jaguar Land Rover offers residual value guarantees on
the purchase of certain leases in some markets. The value of
these guarantees is dependent on used car valuations in those
markets at the end of the lease, which is subject to change.
Consequently, the Company may be adversely affected by
movements in used car valuations in thesemarkets. Also, Jaguar
Land Rover has arrangements in place with FGA Capital, a
joint venture between Fiat Auto and Credit Agricole (FGAC)
for the UK and European consumer finance, Chase Auto Finance
in North America, and has similar arrangements with local
providers in a number of other key markets. The Company
works closely with its commercial finance providers to
is considering a number of options to counter this issue,
including discussions with the Brazilian government to exempt
a number of imported vehicles from the increased tariff.
Political instability,wars, terrorism,multinational conflicts,
natural disasters, fuel shortages / prices, epidemics, labour
strikes:
The Company’s products are exported to a number of
geographical markets and the Company plans to expand
international operations further in the future. Consequently,
the Company is subject to various risks associated
with conducting the business both within and outside the
domestic market and the operations may be subject to
pol itical instabi l ity, wars, terrorism, regional and / or
multinational conflicts, natural disasters, fuel shortages,
epidemics and labour strikes. In addition, conducting business
internationally, especially in emerging markets, exposes the
Company to additional risks, including adverse changes in
economic and government policies, unpredictable shifts in
regulation, inconsistent application of existing laws and
regulations, unclear regulatory and taxation systems and
divergent commercial and employment practices
and procedures.
Product liability, warranty and recall:
The Company is
subject to risks and costs associated with product liability,
warranties and recalls, should the Company supply defective
products, parts, or related after-sales services, including by
generating negative publicity, which may adversely affect the
Company ’s business, results of operations and financial
conditions. Such events also require the Company, expend
considerable resources in correcting these problems and could
adversely affect the demand for the products. Furthermore,
the Company may also be subject to class actions or other
large scale product liability or other lawsuits in various
jurisdictions in which it has a significant presence.
Jaguar Land Rover Pension obligations:
The Company
provides post-retirement and pension benef its to its
employees, some of which are defined benefit plans. The