February 6, 2019 / 9:36 AM / 13 days ago

Fitch puts Tata Motors on negative watch over JLR's Brexit woes

A Tata Motors logo is pictured outside the company showroom in Mumbai, February 5, 2018. REUTERS/Danish Siddiqui/File Photo

(Reuters) - Fitch Ratings said on Wednesday it has placed the credit rating of India’s Tata Motors Ltd on negative watch, stating increasing risks for its British luxury car unit - Jaguar Land Rover (JLR) - over a potentially chaotic Brexit.

This comes after the ratings agency placed the credit ratings of JLR, Britain’s biggest carmaker, under review for possible downgrades.

“Trade barriers and logistic issues from a disorderly Brexit could have an impact on JLR’s competitive positioning and ‍lead to significantly lower sales and profitability,” the credit rating agency said, placing the parent’s long-term issuer default rating on “‍rating watch negative”.

JLR had said in January there would be a week-long pause in production in April due to potential disruption from Brexit and trimmed production.

The carmaker, based in central England, is also planning to prune its workforce as it battles to return to profitability amid lower Chinese demand and a slump in European diesel sales.

The action was prompted by uncertainty ahead of Brexit, which could lead to lower sales and higher costs that may strain the company’s liquidity position, Fitch added.

British Prime Minister Theresa May’s Brexit deal was rejected in parliament last month and the government is trying to make changes to win the support of lawmakers even as the divorce date for Britain’s departure from the European Union looms less than two months away.

Reporting by Chandini Monnappa in Bengaluru, Editing by Sherry Jacob-Phillips

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