Tata Jaguar LandRover.. Copy

8/2/2019 Tata Jaguar LandRover.. Copy

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Overview


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It is the 5th largest medium and heavycommercial vehicle manufacturer in the world.listed in BSE, NSE & NYSE.

Subsidiaries-

JAGUAR CARS

LAND ROVER

TATA DAEWOO COMMERCIAL

TATA MOTORS Company Profile


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JLR-One more step towardsa Global Footprint


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1922 - Founded in Blackpool as Swallow

Sidecar company

1975 - Nationalized in due to financial

difficulties

1984 - Floated off as a separate co in the

stock market

1990 - Taken over by Ford

A statement of ultra luxury, Holds Royal

warrants, Rarely advertised, Fords formula

one entry since 1990s

JAGUAR The ups anddowns


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Founded in 1948 as a marquee of the Rover

Company.

Known for superior off-road performance, Used

by

military for projects and expeditions, Safe butless reliable, Makeover in recent times

In 1994 Rover Group is taken over by BMW &

sold to FORD MOTORS for 2.75 bn$ in 2000.Key issues:

Ford acquired Jaguar for $2.5 billion in 1989.

Ford acquired Land Rover for $2.75 billion in

LAND ROVER


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Ford acquired Jaguar for $2.5 billion in1989.

Ford acquired Land Rover for $2.75 billion

in 2000.

But the US auto major put the two

marquees on the market in 2007 afterposting losses of $12.6 billion in 2006 - theheaviest in its 103-year history.

KEY ISSUES


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Reports said losses at Jaguar stood at USD715 million in 2006.

The 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 thechallenge-Its a test that Ford failed.

Ford is combining both the brands

Why is Ford Selling?


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12/06/2007- Announcement from Ford that itplans to

sell Land Rover and Jaguar.

August 2007 - Major bidders are identified Likely buyers:Tata Motors, M&M, Ceribrus

capital Management, TPG Capital, ApolloManagement

Indias Tata Motors and M&M arrive as topbidders ($ 2.05b & $ 1.9b)

03/01/2008 Ford announces Tatas as thepreferred bidders

26/03/2008 - Ford agreed to sell their Jaguar

THE DEAL PROCESS


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Consumer demand plummeted

Credit lines were frozen

Automotive sector in India sufferedcontraction in demand

Launch of Nano delayed

Tata Motors reeling under a hugedebt burden

The Real Picture..


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Tata Motors FinancialPerformance

Q3FY09 Q3FY08 9MFY09 9M FY 08

Revenue 47,586.2 72,518.3 187,659.2 199,813.0

EBITDA 916.5 8,197.4 11,186.3 21,608.6

Profit beforeTax

(4191.5) 6651.0 2839.5 18,784.2

Net Profit (2632.6) 4990.5 4098.4 14,926.5

(In Rs. Million)

Total Commercial

Vehicles

49,546 82,5568 195,192 215,313

Total Passenger Vehicles 42,187 49,284 142,507 153,475

Exports 7,027 12,756 29,177 40,488

Total Volumes 98,760 144,608 366,876 409,276

Volume Summary


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The profits for the first quarter for theyear 2008-09 were at 3.26 billion

Q3 the sales of passenger vehicles went

down to 41,287 units a drop of 14.14% Tata Motors cut production across

different categories.

Problems in theDomestic Market


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The Nano was targeted at the segmentof two-wheeler drivers

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 thanRs 20 million on the Singur plant

The Quest for theCheapest Car..


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Analysis


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Strategic logic

Long term strategic commitment to automotive sector.

Opportunity to participate in two fast growing auto segments- Luxurycars and all terrain vehicles.

Enhanced human capital and managerial talent.

Improvement in global market position through a combination ofresources and strengths.

Sharing of best practices in manufacturing and quality assurancesystems and processes

Benefits from component sourcing, design services and low costengineering


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COMPETITIVE ADVANTAGE

Tata Motors is vulnerable to greatercompetition at home. Foreign vehicle

makers including Daimler, Nissan Motor,Volvo and MAN AG have struck localalliances for a bigger presence.

Tata Motors, which has a joint venturewith Fiat for cars, engines andtransmissions in India, is also facingheat from top car maker Maruti SuzukiIndia Ltd, Hyundai Motor, Renault andVolkswagen.


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Valuation of deal

A] Cost synergies

1] Material costs and not manpower key to better margins. Purchasing basket offers bigger opportunity for cost reduction It is more important to manage the material & sourcing costs to

improve margins Material Cost is 4-6x the wage cost for high-endproducts such as Land Rover.

2] Tata Group has multiple levers

Tata Auto Comp (TACO) - TATA group has a a rich ecosystem of JVswith leading players in Auto ancillary space held through TACO.

TCS, Corus and Incat have varied competencies in the Auto space

B] Revenue synergies - A long-term possibility

In the long-run Tata Group and Tata Motors footprint in South-EastAsia should help Jaguar/Land Rover diversify their geographicdependence from US (30% of volumes) and Western Europe (55%of volumes


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COST SYNERGIES


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Approach to acquisition

12/06/2007- Announcement from Ford that itplans to sell Land Rover and Jaguar.

August 2007 - Major bidders are identifiedLikely buyers: Tata Motors, M&M,

Ceribrus capital Management, TPGCapital, Apollo Management

India's Tata Motors and M&M arrived as top

bidders ($ 2.05b & $ 1.9b)

03/01/2008 Ford announces Tatas as thepreferred bidders

Tata motors raised a bridge loan of US $ 3


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Contd..

Additional amount of US $ 0.7 billion was forengine and component supply, contingenciesand working capital.

The amount was repaid in following manner

Rs 1.92 billion Underwriting agreement with JMfinancial consultants

Rs 1.75 billion was raised through a depositscheme from the public

Additional subscriptions by promoter

companies- Tata sons, Tata capital and TataInvestment Ltd.

1 billion aid package by British Government .(out of total 2.3 billion )


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Post merger

Following Cost Rationalisation initiativeswere 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 133 million from

38 to 27 days.4] Inventory reduced by 217m between June

2008 and March 2009 from 70 to 50 days .


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Contd..

5] Labor actions - Voluntary retirement to 600 employees.- Agency staff reduced by 800.-Offered leaves to 300 workers of Bromwhich and solihullplant.

-Additional 450 job cuts including 300 managers.6] Agreement with Unions to implement pay freeze and longer

working hours (equivalent to approximately 20% reductionin labor costs.)

7] Engineering and capital spending efficiencies.

8] Fixed marketing and selling costs reduced in line with salesvolume.

9] Reduction in all other non-personnel related overheadcosts.


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Evaluation


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THE DEAL100% stake in Jaguar& land Rover

Business

TAMO has acquired the business & initially they will beoperated independently of the partner.

3 Plants in UK These are well invested plants

2 advanced design& engineeringcenter

4-5000 engineers engaged in testing ,prototype design &powertrainEngineering , development & integration

26 National salescompany

Both existing national sales companies of jaguar/land rover& also those that are carved out of current Ford operation

Intellectualproperty rights

This covers all key technologies to be transferred to JLR &perpetual royalty free license on technologies shared with

FordCapital Allowance A minimum guaranteed amount of $1.1 bn which will help

managing in Tax going forward

Support from FordMotor Credit

Ford Motor Credit will continue to support the sales of JLR foraround next 12 months

PensionContributed by

Ford will contribute $ 600 mn of the Pension Fund


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Problems

Drop in share prices

Failure of rights issue

Huge debt burden

Sales volume decreased by 35.2%

Lack of consumer loans Issue of timing

Operational freedom slows pace of

change


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Depressed state of the globalpremium car market

Jaguar/Land Rover lost 306 millionpounds ($504 million) for the fiscalyear ending March 2009

Tata Motors reported a net loss ofRs3.29bn ($67 million) for thequarter to end-June

Tatas core commercial vehicles

market in India is also suffering from


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Extremely high manufacturing costsin Britain

Eliminated more than 2,200 jobs


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Benefits

Tata wanted to make a global impactand it thinks that buying thesebrands at a lower rate now, will give

better value later on.

This acquisition also eases the entry

of Tata in European market which ithas been eyeing for long. A previous

JV with FIAT took place, this will

further help them penetrate EU


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Reduce the company dependence onthe Indian market which accountedfor 90% of its sales

Increase sales in emerging markets

Reduce dependence on maturemarkets

Opportunity to spread its business


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At the price staring from 63 lakh andgoing upto 93 lakh, it seems Tata has

just got the right place to compete

with the current market leaders BMW, Audi, Mercedes

Publicity on an international scale

Access to large distribution network


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JLR had many new models lined upfor next 3 years, so no much work

just profits

Strong R & D culture and facilities

Component sourcing, engineeringand design benefits


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SWOT


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Recommendations


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Partnering

Keep acquisition structurallyseparate

Maintain its identity

Hunt for synergies in selected areas Procurement synergies


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Prevent their own antecedents fromclouding established brands

Share operational Know-how

Operational Autonomy


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Current Status

Jaguar Land Rover global sales inDecember 2009 were 21,134vehicles, higher by 33%.

Jaguar sales for the month were4,794, higher by 5%, while LandRover sales were 16,340, higher by

45%


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Thank You

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