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    Tata Jaguar - Amit and Amrit

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    Taruna Juneja
    Tata Motors acquired Jaguar Land Rover from Ford in 2008 for $2.3 billion. Jaguar was founded in 1922 and produced motorcycles and sidecars before switching to passenger cars. Land Rover was founded in 1948. Ford was selling the brands due to large losses, and Tata Motors saw it as an opportunity to expand into new markets and segments. The acquisition provided Tata access to new technologies, distribution networks, and brands to compete globally. However, Tata also took on large debts and faced challenges integrating the luxury brands into its portfolio during the economic downturn.

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    Tata Jaguar - Amit and Amrit

    Uploaded by

    Taruna Juneja
    96 views22 pages
    Tata Motors acquired Jaguar Land Rover from Ford in 2008 for $2.3 billion. Jaguar was founded in 1922 and produced motorcycles and sidecars before switching to passenger cars. Land Rover was founded in 1948. Ford was selling the brands due to large losses, and Tata Motors saw it as an opportunity to expand into new markets and segments. The acquisition provided Tata access to new technologies, distribution networks, and brands to compete globally. However, Tata also took on large debts and faced challenges integrating the luxury brands into its portfolio during the economic downturn.

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    Tata Motors acquired Jaguar Land Rover from Ford in 2008 for $2.3 billion. Jaguar was founded in 1922 and produced motorcycles and sidecars before switching to passenger cars. Land Rover was founded in 1948. Ford was selling the brands due to large losses, and Tata Motors saw it as an opportunity to expand into new markets and segments. The acquisition provided Tata access to new technologies, distribution networks, and brands to compete globally. However, Tata also took on large debts and faced challenges integrating the luxury brands into its portfolio during the economic downturn.

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    Download as pptx, pdf, or txt
    96 views22 pages

    Tata Jaguar - Amit and Amrit

    Uploaded by

    Taruna Juneja
    Tata Motors acquired Jaguar Land Rover from Ford in 2008 for $2.3 billion. Jaguar was founded in 1922 and produced motorcycles and sidecars before switching to passenger cars. Land Rover was founded in 1948. Ford was selling the brands due to large losses, and Tata Motors saw it as an opportunity to expand into new markets and segments. The acquisition provided Tata access to new technologies, distribution networks, and brands to compete globally. However, Tata also took on large debts and faced challenges integrating the luxury brands into its portfolio during the economic downturn.

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    Tata Motors

    Acquisition of
    Jaguar Land Rover
    Presented by:
    Amit Kishore Gupta
    Amrit Daspatnaik
    Jaguar: An overview
    1922 - Sir William Lyons founded jaguar as the
    Swallow Sidecar Company in 1922, originally
    making motorcycle sidecars before switching to
    passenger cars
    1960 - Jaguar name first appeared after World
    war II
    1984 - Listed in the stock market
    1990 - Taken over by Ford. JLR was a part of
    Ford's Premier Automotive Group (PAG) and
    were considered to be British icons.
    Tata Motors Acquisition of Jaguar Land Rover
    Land Rover: An overview
    1948: Land Rover is designed by the Rover Car
    co
    1976: One millionth Land Rover leaves the
    production line
    1994: Rover Group is taken over by BMW
    2000: Sold to Ford for $2.75b

    Tata Motors Acquisition of Jaguar Land Rover


    Tata Motors: An overview
    TATA Group is 150 year old, Previously Tata
    Engineering and Locomotive Company (Telco)
    India'slargest passenger automobile and
    commercial vehicle
    Tata Motors was established in 1945
    Listed on the New York Stock Exchange in 2004
    It is the 5th largest medium and heavy
    commercial vehicle manufacturer in the world.
    listed in BSE, NSE & NYSE

    Tata Motors Acquisition of Jaguar Land Rover


    Why was Ford selling?
    The US auto major put the two marquees on the
    market in 2007 after posting losses of $12.6b in
    2006 - the heaviest in its 103-year history.
    Jaguar was not 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.
    Ford was combining both the brands since the
    products and manufacturing of vehicles for Land
    Rover and Jaguar was so intertwined.
    Tata Motors Acquisition of Jaguar Land Rover
    Why to acquire JLR?
    Long term strategic commitment to
    automotive sector
    Opportunity to participate in two fast growing
    auto segments
    Increased business diversity across markets
    and products
    Jaguar offered a range of performance/luxury
    vehicles to broaden the brand portfolio
    Benefits from component sourcing, design
    services and low cost engineering

    Tata Motors Acquisition of Jaguar Land Rover


    The Deal Process
    June 2007 - Announcement from Ford that it plans to
    sell Land Rover and Jaguar
    August 2007 - Major bidders were identified Tata
    Motors, M&M, Ceribrus Capital Management, TPG
    Capital, Apollo Management
    Indias Tata Motors and M&M arrived as top bidders
    ($ 2.05b & $ 1.9b)
    Jan 2008 Ford announces Tata as the preferred
    bidders
    Mar 2008 - Ford agreed to sell their Jaguar Land
    Rover operations to Tata Motors at $ 2.3b
    June 2008The acquisition was completed

    Tata Motors Acquisition of Jaguar Land Rover


    The Deal Process

    Tata Motors Acquisition of Jaguar Land Rover


    Financing strategy
    Tata Motors had a cash pile of over Rs.6,000 crore
    and generated free cash of over Rs.1,000 crore
    during FY07. It could easily use these reserves to
    raise more funds without endangering its finances
    At the end of last financial year, Tata Motors debt-
    to-equity ratio was a low of 0.56x, giving it ample
    head room to raise more funds
    Low leverage of the auto biz provided funding
    flexibility

    Tata Motors Acquisition of Jaguar Land Rover


    Financing strategy Cont
    Raised a 15-month bridge loan of $3b
    Additional amount of US $0.7b was for engine and
    component supply, contingencies and working
    capital
    It intended to refinance the loan through long-
    term funds
    Valuable stakes in group companies
    Owns $400m of Tata Steel
    Owns stake in Tata Sons (Tata Groups holding
    company) worth at least $600m

    Tata Motors Acquisition of Jaguar Land Rover


    The Deal of $2.3b

    Tata Motors Acquisition of Jaguar Land Rover


    Tata and the dream
    NEED FOR GROWTH
    In the past few years, the Tata group had led
    the growing appetite among Indian companies
    to acquire businesses overseas in Europe, the
    United States, Australia and Africa - some even
    several times larger - in a bid to consolidate
    operations and emerge as the new
    agemultinationals
    Tata Motors was India's largest automobile
    company, with revenues of $7.2b in 2006-07.
    With over 4m Tata vehicles plying in India, it
    was the leader in commercial vehicles and the
    second largest in passenger vehicles
    Tata Motors Acquisition of Jaguar Land Rover
    Tata and the dream Cont
    COMPETITIVE ADVANTAGE
    Tata Motors was vulnerable to greater competition
    at home
    Foreign vehicle makers including Daimler, Nissan
    Motor, Volvo, etc. had struck local alliances for a
    bigger presence
    Tata Motors, which had a joint venture with Fiat
    for cars, engines and transmissions in India, was
    also facing heat from top car maker Maruti Suzuki
    India Ltd, Hyundai Motor, Renault and Volkswagen

    Tata Motors Acquisition of Jaguar Land Rover


    SWOT Analysis
    Strengths: Weaknesses:
    Tatas strong management Jaguars declining sales record
    capability Inexperience of handling such
    luxury brands
    Strong monetary base to invest Tatas
    Jaguar Land
    Rover
    Opportunities: Acquisition
    Support from Ford in terms of
    Technology, Engine, IT, Threats:
    Accounting Market is volatile and driven by
    new products
    Adding up of luxury brands in
    the product line Strong presence of competitors
    Access to European Market like Mercedes, BMW, etc.

    Tata Motors Acquisition of Jaguar Land Rover


    Post Acquisition
    Following Cost Rationalisation initiatives were taken to
    improve cash flows:

    1. Single shifts and down time at all three UK assembly


    plants

    2. Supplier payment terms extended from 45 to 60 days


    in line with industry standard

    3. Receivables reduced by 133m from 38 to 27 days

    4. Inventory reduced by 217m between June 2008 and


    March 2009 from 70 to 50 days

    5. Agreement with Unions to implement pay freeze and


    longer working hours (equivalent to approximately
    20% reduction in Acquisition
    Tata Motors labor costs)of Jaguar Land Rover
    Post Acquisition Cont
    6. 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

    7. Increase in Engineering and capital spending


    efficiencies

    8. Fixed marketing and selling costs reduced in line with


    sales volume

    9. ReductionTata
    in all other
    Motors non-personnel
    Acquisition of Jaguar Landrelated
    Rover overhead
    Share Price Movement

    Around 45% dip during May 21, 2008 - July 8, 2008


    Tata Motors Acquisition of Jaguar Land Rover
    Problems
    Drop in share prices
    Huge debt burden
    Sales volume decreased by 35.2%
    Lack of consumer loans
    Issue of timing
    Operational freedom slows pace of change
    Depressed state of the global premium car
    market

    Tata Motors Acquisition of Jaguar Land Rover


    Problems Cont
    Jaguar/Land Rover lost 306m ($504m) for
    the fiscal year ending March 2009
    Tata Motors reported a net loss of Rs.3.29b
    ($67m) for the quarter to end-June
    Tatas core commercial vehicles market in
    India is also suffered from slower sales
    Extremely high manufacturing costs in Britain
    Eliminated more than 2,200 jobs

    Tata Motors Acquisition of Jaguar Land Rover


    Benefits
    This acquisition eases the entry of Tata in European
    market which it has been eyeing for long. A previous
    JV with Fiat took place, this would further help them
    penetrate EU market
    Opportunity to spread its business across different
    customer segment
    At the price staring from Rs.63 lakh and going upto
    Rs.93 lakh, it seems Tata has just got the right place
    to compete with the current market leaders BMW,
    Audi, Mercedes, etc.
    Access to large distribution network
    Strong R & D culture and facilities
    Component sourcing, engineering and design benefits
    Tata Motors Acquisition of Jaguar Land Rover
    Conclusion
    A successful acquisition

    Around 345% increase since the acquisition on June 2, 2008


    Tata Motors Acquisition of Jaguar Land Rover
    THANK YOU

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