Tata Motors

Tata Motors
To develop Tata into a World Class Indian Car brand for innovative and superior value vehicles Indias largest automobile company Revenue - 51,328 crore in 2011 (36066 crore in 2008). Relatively unknown in global markets in the Europe and US. 90% of its sales were in India. Most ambitious projects till date had been the Indica and Nano.

Jaguar Land Rover

To create and build beautiful fast cars that brings the enjoyment and exhilaration of driving to life Jaguar Cars - one of the premier manufacturers of luxury saloons and sports cars

Land Rover cars known for ruggedness, superior off road performance
Engines and components - mainly supplied by Ford

Why did Jaguar bleed under Ford?

Retro Styling Cost Cutting Concentric Diversification Brand Building Positioning Management Focus
Designs were old and outdated Less appealing to the young buyers Sharing platforms with other Ford vehicles dilution of image Limiting customization- which was not liked by customers Came out with affordable cars X-Type and S-Type Confused Positioning and chaos in minds of customers No mass advertising unlike Ferrari and Lamborghini

Ford was trying to position Jaguar into the volume business to compete with the likes of Audi and BMW volume business According to Ian Callum, design director at JLR, earlier under Ford, design approvals took weeks whereas under Tatas it now takes much lesser time.

Does JLR fit into the Tata strategy?

Tata Motors
Positioning : Value for money

JLR
Positioning: Marquee luxury brands Sales mainly in EU and US

90% sales in India

Average Selling Price : ~$8000

Average Selling Price: ~$50000

Ansoffs Matrix
Existing Markets New Markets Existing Products Market Penetration Tata Motors is Indias largest automobile company and 3rd largest in PV Market Development Tatas Motors could leverage on JLRs distribution network and global reach for its ambitious expansion plans in the future Diversification Tata Motors wanted to diversify its business by investing into a business JLR which operated very in different markets from Tata and had vastly different line of products

New Products Product Development- Tata Motors could exploit JLRs expertise in R&D to develop new products in the Indian markets and help improve its existing products New markets

Should Tata go in for JLR ?

Parameter Access to JLR distribution network Potential Benefits Tata Motors can leverage JLR distribution network in US and EU to realize its ambitious business plans for PV going forward Rationalize capacity in Europe and outsource manufacturing to India Really ? Due to differences highlighted earlier in positioning and gross realization Tata stands a better chance of leveraging Fiats distribution network than that of JLR TM has assured of no plant shutdowns and no job losses for 3 years. Besides cost of components is about 4-6 x of the labor costs in cars such as those of JLR

Leveraging TMs low cost manufacturing capability

Benefits to Tata Motors

Diversification into Luxury Car Market.

Instant access to technology and expertise which would

take years to build organically reflects major investments by Ford and BMW Provide an instant global recognition and credibility Reduce Tata Motors dependence on Indian markets Tata would be getting 2 advance design studios as part of the deal

Parenting Matrix
Ballast Business Heartland Businesses (Eventual JLR deal turned into this)

Feel Alien Business

Value Trap Business (Jaguar Land Rover Acquisition)

Benefit

Synergies with Tata Group Companies

Tata Technologies INCAT Setting up separate IT ecosystem by INCAT
Tata Auto comp Systems (TACO) TACO supplies auto components to Land Rover

Challenges for Tata Motors

New models , better marketing and more innovation , huge

investment Land Rover was profitable while Jaguar was not Even after Ford has pumped in almost $10 billion in Jaguar prior to sale Tata cannot split the businesses of JLR Issues with Jaguar
Too small to compete with likes of BMW which sell 20x It does not have the prestige to operate in the space owned by Bentley

or Rolls Royce

Both Jaguar and Land Rover did not produce environment friendly

cars and outlook for gas guzzlers was dismal There were 3 plants in Britain producing quarter million vehicles which indicated under utilization of the plants and ideally should require only one plant.

The Tata-JLR Deal Leveraged Buyout

Tata acquired JLR for $2.3 billion
It was to be funded through a mix of existing cash

reserves and new debts Tata Motors initially raised $3 billion (about Rs 12,000 crore) through bridge loans for 15 months from a clutch of banks, including JP Morgan, Citigroup, and State Bank of India

Immediate Outcome TM in trouble

Tata came under cash crisis due to the Nano Project and the

Corus deal Total debt stood at 21,900 crore as of Mar 2009 and its market value plummeted to 6503 crore Banks were unwilling to lend money due to recession and the negative outlook on the deal Tata Motors key financial figures March 2009 Revenue 36066 March 2008 69865

Net Profit
EPS Total Debt Debt Ratio

-2465
-54.9 34683 Equity 6.73

2234
57.97 11584 1.34

Strategies to revive JLR

Autonomy Kept JLR independent Young managers put in charge Cash Management KPMG roped in for cash management Cost Management Roland Berger Strategy Consultants were roped in for cost management A target was set to contain costs at various levels

Cash Cycles
Supplier Payment terms extended from 45 to 60 days Receivables reduced by 133 million pounds Inventory reduced by 217 million pounds from June 2008 to March 2009

Strategies to revive JLR

Labor Rationalization Offering voluntary retirements, leaves to about 12800 workers Raising Cash Tata Motors divested stake in Tata Steel to raise 485 crore Rights offer of 4147 crore Product Development Tata Motors committed investment of 8 billion over 5 years to keep new product development plans going which later proved crucial Launch of new vehicles XJ, XF and Range Rover Evoque Improved quality of cars, forward thinking and desirable cars External Factors Favorable exchange rates Strong demand in emerging markets China, Russia, India Improved market sentiments

The Turnaround
JLRs key figures for Dec2011
Parameter Retail Volumes (units) Wholesale volumes(units) Revenue Volumes in China(units) Volumes In Europe(units) Jaguar Sales(units) Land Rover Sales(units) Figure 78293 86322 3749 million pounds 12613 18695 13006 65287 Change (QoQ) 34% 37% 41% 58% 46% 41% 9%

To assemble cars in Pune, India JV with Cherry Automobile of China ERC, Pune one of the biggest R&D efforts JLR now contributes 2/3 of the TMs revenues