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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