Tata-jaguar and-land rover deal

introduction
In 2008, India-based Tata Motors Ltd. acquired two iconic British brandsJAGUAR and LAND ROVER for US $2.3 billion. The sale of Jaguar and Land Rover was initiated by their former owner US FORD.

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TATA MOTORS A SNAPSHOT

Tata group is 150 years old,
previously Tata Engineering and Locomotive Company, TELCO.

Indias largest passenger automobile and commercial vehicle.

Tata Motors was established in 1945. Listed on the New York Stock Exchange in 2004.
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About JAGUAR
1922 - Founded in Blackpool as Swallow Sidecar company . 1984 - Floated off as a separate co in the stock market

1990 - Taken over by Ford .

Ford acquired Jaguar for $2.5 billion in 1989.

About Land rover

Founded in 1948 as a marquee of the Rover Company.

In 1994 Rover Group was taken over by BMW & sold to FORD MOTORS for $2.75 billion in 2000.

Why was Ford Selling?.....

Ford made losses of 12.6 billion in the year 2006,the biggest ever in its 103 year history. Most of the loss was the result of bad performance of Jaguar, Land Rover however was performing steadily, Land Rover was driven by a record sale of 2.26 lakh vehicles in the year 2007. Ford announced for a combined sale of both Jaguar and Land Rover.
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Reasons for acquisition

Decrease in sales of Jaguar and Land Rover in the U.S. markets . Tata Motors had desired to have diversified line up. Good research and development facilities at a reasonable price.
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Contd.
Acquiring JLR would help TATA for Component sourcing , design services and low cost engineering. Corus being the major supplier of automotive steel to JLR and other automobile industries in USA and Europe, acquiring JLR would result in a cost synergy for TATA motors.

THE DEAL PROCESS

12/06/2007- Announcement from Ford that it plans to sell Land Rover and Jaguar. August 2007 - Major bidders are identified Likely buyers: Tata Motors, M&M, Ceribrus capital Management, TPG Capital, Apollo Management Indias Tata Motors and M&M arrive as top bidders ($ 2.05b & $ 1.9b) 03/01/2008 Ford announces Tatas as the preferred bidders 26/03/2008 - Ford agreed to sell their Jaguar Land Rover operations to Tata Motors. 02/06/2008 The acquisition is complete

The Real Picture..

Consumer demand dropped Automotive sector in India suffered contraction in demand Launch of Nano delayed Tata Motors reeling under a huge debt burden Problems in the Domestic Market

Launch of WorLds cheapest Car..

The Nano was touted to be the least expensive car in the world Tata Motors spent approximately US $430 million on developing the Nano The company had invested more than Rs 20 million on the Singur plant

Analysis

Strategic logic
Long term strategic commitment to automotive sector. Opportunity to participate in two fast growing auto segmentsLuxury cars and all terrain vehicles. Increased business diversity across markets and products. Sharing of best practices in manufacturing and quality assurance systems and processes Benefits from component sourcing, design services and low cost engineering

COMPETITIVE ADVANTAGE
Tata Motors was helpless due to greater competition at home. (Daimler, Nissan Motor, Volvo and MAN AG) Tata Motors, which has a joint venture with Fiat for cars, engines and transmissions in India, is also facing heat from top car maker Maruti Suzuki India Ltd, Hyundai Motor, Renault and Volkswagen.

COST SYNERGIES
Tata auto component Flagship company of TAMOs ancillary biz Manufacturing, Engineering and Supply chain management Customers include Global OEMs like Ford, Daimler, Chrysler, FIAT Tata Steel - Corus Leader in automotive grade steel in the European markets 16% of revenue from auto steel division Enjoys Q1 supplier status with Ford to supply steel for Jaguar and Land Rover

JLR
Tata Consultancy Services Provides services like engineering design, manufacturing solutions and sourcing services Automotive division accounted for 15% revenues Major customers are Chrysler, Ford, GM INCAT Provides services like supplier programs, consulting services and global sourcing Major customers are Chrysler, Ford, GM, Honda and Nissan

Contd..
Tata motors raised a bridge loan of US $ 3 billion through syndicate of banks. Additional amount of US $ 0.7 billion was for engine and component supply, contingencies and working capital. The amount was repaid in following manner
Rs 1.92 billion Underwriting agreement with JM financial consultants Rs 1.75 billion was raised through a deposit scheme from the public Additional subscriptions by promoter companiesTata sons, Tata capital and Tata Investment Ltd.

Post acquisition

Cost Rationalization
Single shifts and down time at all three UK assembly plants. Supplier payment terms extended from 45 to 60 days in line with industry standard. Inventory reduced by 217m between June 2008 and March 2009 from 70 to 50 days .

Contd..
Labor actions - Voluntary retirement to 600 employees. - Agency staff reduced by 800. -Offered leaves to 300 workers of Bromwhich and solihull plant. -Additional 450 job cuts including 300 managers. Agreement with Unions to implement a longer working hours (equivalent to approximately 20% reduction in labor costs.) Fixed marketing and selling costs reduced in line with sales volume. Reduction in all other non-personnel related overhead costs.

Problems
FALL IN SHARE PRICE DEBT BURDEN STRONG COMPETITION INEXPERIENCE IN HANDLING LUXURY BRANDS JAGUAR WAS A LOSS MAKING UNIT AND LANDROVER HAD DECLINING SALES.
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Benefits
VIEW OF RATAN TATA THAT THERE WOULD BE FURTHER OPPORTUNITIES. GLOBAL FOOTPRINT AND TO REDUCE DEPENDANCE ON INDAIN MARKET.
ENTRY IN EUROPEAN MARKET.

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Contd..
BROADEN THE BRAND PORTFOLIO. RESEARCH AND DEVELOPMENT FACILITIES. RECOGNITION TO OWN THE CHEAPEST CAR .AS WELL AS MOST LUXURIOUS CARS. OPPORTUNITY TO SPREAD BUSINESS ACROSS DIFFERENT CUSTOMER SEGMENT.

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Swot
Strengths: Tatas strong management capability Strong monetary base to invest Weaknesses: Jaguars declining sales record Inexperience of handling such luxury brands

Opportunities: Support from Ford in terms of Technology,Engine, IT, Accounting Adding up of luxury brands in the product line 19-10-2012 Access to European Market

Tatas Jaguar Land Rover Acquisition

Market is volatile and driven by new products Strong presence of competitors like Mercedes, BMW, Lexus and 23 Infinity

CURRENT STATUS
Jaguar land rover sales continued their upward trend since launch in June 2009. During the quarter ended June 2010 JLR generated a profit of Rs 1613 crore. Tata motors had never ventured into luxury car segment before acquiring JLR, hence the inefficiency in handling such segment hampered Tata motors operational efficiency for quite some time. 24

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 Jaguar Land Rover is now a strong, profitable and innovative competitor in the premium car industry. 26% Delivery Growth. JAGUAR LANDROVER global sales in July 2010 were 19,386 vehicles, higher by 30%. Jaguar sales for the month were 5,676, higher by 26%, while Land Rover sales were 13,710, higher by 31%.

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 Recently TATA MOTORS drove

past Reliance Industries to top the 2010edition of Indias Most Valuable Brands survey with a valuation of $8.45billion. A major part of this success can be attributed to the JAGUAR AND LANDROVER.

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