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. Jaguar has been a dog i.e. it has not been able to provide any profit for ford because of the high manufacturing costs provided in the United Kingdom. The strong boy Land Rover's profit, on the other hand, was driven by the record sale of 2.26 lakh vehicles, an 18% YoY growth in 2007.. Bringing down production costs and turning around the company successfully will be the challenge,” analysts said. It was a test that Ford failed. Ford announced for a combined sale of both Jaguar and Land Rover
opportunity to spread its business across different geographies and across different customer segments...Long term strategic commitment to automotive sector.Opportunity to participate in two fast growing auto segments.Jaguar offers a range of “performance/luxury” vehicles to broaden the brand portfolio.Reduce the company's dependence on the Indian market, which accounted for 90% of its sales.Good research and development facilities at a reasonable price.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.
Experts believed that it was not a right move for Tata Motors.Negative stock markets reaction due to acquistionHowever, Tata Motors have proved all their detractors wrong and have turned the Jaguar, Land Rover fortunes into gold, that too in 3 short years! As a country we should be proud of what Tata Motors has achieved to do!Infact, in 2009, Tata Motors suffered an annual loss of over half a Billion dollars due to slump in Land Rover & Jaguar sales – It really looked like Tata Motors had put a foot wrong with JLR deal.But recently Tata Motors announced its annual numbers and it revealed that more than 80 % of annual profits came from the JLR unit alone.Before acquistion, Jaguar & Land Rover had annual sales figures of 50,000 cars. In just 3 short years, Tata Motors has managed to sell a whooping 244,000 Jaguar & Land Rover cars globally!
Tata Motors Acquisition ofJaguar and Land Rover AGENDA 1. Acquisition of British Icons 2. British Marques under Ford 3. Ford Sells JLR 4. The Deal 5. The Benefits 6. The Challenges 7. The Road Ahead
Tata Motors Acquisition ofJaguar and Land RoverWhen: In June 2008.Acquired whom: Jaguar and Land Rover (JLR) from the US-based Ford MotorsPrice: US$ 2.3 billion.Why:1. the acquisition would help the company acquire a globalfootprint2. enter the high-end premier segment of the global automobilemarket. After the acquisition, Tata Motors would own the worldscheapest car. the US $ 2,500 Nano, and luxury marquees like theJaguar and Land Rover
TATA MOTORs COMPANY PROFILEFormerly known as TELCO, headquartered in Mumbai.Part of the Tata Group, and one of the worlds largestmanufacturers of commercial vehicles Tata group is 150 years old India’s largest passenger automobile and commercial vehicle.Tata Motors was established in 1945. Listed on the New York Stock Exchange in 2004.
About JAGUAR 1922 - Founded in Blackpool as Swallow Sidecar company1984 - Floated off as a separate co in the stock market1990 - Taken over by Ford .Ford acquired Jaguar for $2.5 billion in 1989.
About Land roverLand Rover is an all-terrain vehicle andMulti Purpose Vehicle(MPV) manufacturer,based in Solihull, West Midlands.It is Known for superior off-roadperformance, Used by military for projectsand expeditions,Founded in 1948 as a marquee of the RoverCompany.In 1994 Rover Group was taken over byBMW & sold to FORD MOTORS for $2.75billion in 2000.
Why is Ford selling?Ford made losses of 12.6 billion in the year 2006The result of bad performance of Jaguar. Jaguar has been a dog i.e. it has not been able to provide any profit for ford because of the high manufacturing costs provided in the United Kingdom. The strong boy Land Rovers profit, on the other hand, was driven by the record sale of 2.26 lakh vehicles, an 18% YoY growth in 2007.. Bringing down production costs and turning around the company successfully will be the challenge,” analysts said.It was a test that Ford failed.Ford announced for a combined saleof both Jaguar and Land Rover
WHY tata motors acquireD j.l.r ? Opportunity to spread its business across differentgeographies and across different customer segments. Long term strategic commitment to automotive sector. Opportunity to participate in two fast growing auto segments. Jaguar offers a range of “performance/luxury” vehicles to broaden the brand portfolio.Reduce the companys dependence on the Indian market,which accounted for 90% of its sales. Good research and development facilities at a reasonableprice.Acquiring JLR would help TATA for Component sourcing ,design services and low cost engineering.Corus being the major supplier of automotive steel to JLR.
TATA MOTORs– JLR deal process12/06/2007- Announcement from Ford that it plans to sell LandRover and Jaguar.August 2007 - Major bidders are identifiedLikely buyers: Tata Motors, M&M, Ceribrus capital Management,TPG Capital, Apollo ManagementIndia’s Tata Motors and M&M arrive as top bidders ($ 2.05b & $1.9b)03/01/2008 – Ford announces Tatas as the preferred bidders26/03/2008 - Ford agreed to sell their Jaguar Land Rover operationsto Tata Motors.02/06/2008 – The acquisition is complete
THE DEAL : What Tata had got ???100% stake in TAMO has acquired the business & initially they will beJaguar & land operated independently of the partner.Rover Business3 Plants in UK These are well invested plants2 advanced 4-5000 engineers engaged in testing ,prototype design &design & powertrainengineering Engineering , development & integrationcenter26 National sales Both existing national sales companies of jaguar/land rovercompany & also those that are carved out of current Ford operationIntellectual This covers all key technologies to be transferred to JLR &property rights perpetual royalty free license on technologies shared with FordSupport from Ford Motor Credit will continue to support the sales of JLRFord Motor Credit for around next 12 monthsPension Ford will contribute $ 600 mn of the Pension FundContributed byFord
The Real Picture..Consumer demand droppedAutomotive sector in Indiasuffered contraction in demandLaunch of Nano delayedTata Motors reeling under a huge debt burdenProblems in the Domestic Market
Post acquisition:- COMPETITIVE ADVANTAGE C Tata Steel - Corus O Tata auto component – Flagship company of TAMO’s - Leader in automotive grade S steel in the European ancillary biz – Manufacturing, Engineering and markets T – 16% of revenue from auto Supply steel division chain management – Customers include Global OEMs – Enjoys “Q1” supplier status S with Ford to supply steel like Ford, Daimler, Chrysler, FIAT for Jaguar and Land Y JLR N RoverTata Consultancy Services– Provides services like engineering INCATE Edesign, - Provides services like supplier programs, Rmanufacturing solutions and sourcingservices - consulting services and global G– Automotive division accounted for15% sourcing - Major customers are Chrysler, Irevenues Ford, GM, Honda and E– Major customers are Chrysler, Ford, NissanGM S
COMPETITIVE ADVANTAGETata motors raised a bridge loan of US $ 3 billion through syndicate ofbanks.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 companies- Tata sons, Tata capital and Tata Investment Ltd. Fund Raising (7200 Crore) Ordinary Equity Shares A-Class Equity Shares 5 Year 0.5% Convertible Preference Shares Full Voting Right 1 Vote for every 10 A-Class Optionally convertible into A equity Equity Shares shares after 3years but before 5years (2200 Crore) (2000 Crore) from the date of allotment (3000 Crore) * This is the first time a major Indian Co. is raising money by issuing shares with differential voting rights
Cost RationalizationSingle shifts and down time at all three UK assembly plants.Supplier payment terms extended from 45 to 60 days in line with industrystandard.Inventory reduced by £217m between June 2008 and March 2009 from 70to 50 days . Labor actions – - Voluntary retirement to 600 employees. - Agency staff reduced by 800. -Offered leaves to 300 workers of Brom which 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.
ProblemsFALL IN SHARE PRICEDEBT BURDENSTRONG COMPETITIONINEXPERIENCE IN HANDLING LUXURYBRANDSJAGUAR WAS A LOSS MAKING UNIT ANDLANDROVER HAD DECLINING SALES.
SwotStrengths: Weaknesses: *tata’s strong *Jaguar’s declining salesmanagement capability record Inexperience of*Strong monetary base to handling suchinvest luxury brands tata’s Jaguar Land Rover AcquisitionOpportunities: threats:* Support from Ford interms of Technology, * Market is volatile andEngine, IT, Accounting driven by new products* Adding up of luxury * Strong presence ofbrands in the product line competitors like * Access to European Mercedes, BMW, Lexus and Market Infinity
CURRENT STATUSJaguar 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. 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%.Recently TATA MOTORS drove past Reliance Industries to top the 2010edition of India’s Most Valuable Brands survey with a valuation of $8.45billion. A major part of this success can be attributed to the JAGUAR AND LANDROVER.
Tata Motors JLR TurnaroundExperts believed that it was not a right move for Tata Motors.Negative stock markets reaction due to acquistionHowever, Tata Motors turned fortunes into gold.Infact, in 2009, Tata Motors suffered an annual loss of over half a Billion dollars due to slump in Land Rover & Jaguar sales – It really looked like Tata Motors had put a foot wrong with JLR deal.But recently Tata Motors announced its annual profits - more than 80 % of annual profits came from the JLR unit alone.Before acquisition, Jaguar & Land Rover had annual sales figures of 50,000 cars. In just 3 short years, Tata Motors has managed to sell a whooping 244,000 Jaguar & Land Rover cars globally!
Future PlansGrow the business through new products & market expansion Started assembling Land Rover vehicles at Pune PlantThe company is also seeking to establish a manufacturing base in China and Brazil.JLR to spend 8.2 mn over the next 5 years to compete more effectively with Audi, BMW, Mercedes Benz Transform the business structure to deliver sustainable returns Investment in product development and technology to maintain high qualityThe company aims to increase its marketing and dealer network in emerging markets like Russia, China, India, and the Middle East