The industry was very skeptical on this foolish purchase by Tata. it just didn’t make sense. We commented on the stupidity and predicted failure of the purchase of two luxury brands by junkyarder Tata. Tata Takeover:-Treasure to Trash. Jaguar joins Junk. Rover renamed Rubble. The proof is now here. It is crystal clear that the Western populations of the US and Europe want nothing to do with Tata versions of Rover and the Jaguar. Sales are down by more than 32% and the declining trend shows to signs of recovery. Additionally, the $2.3 Billion purchase is showing a loss of $500 billion per year–a drain so huge that it has brought down the entire Tata group of companies into the red.
India Automakers: Tata
INDIAN AUTO MAKER Tata Motors’ newest acquisitions, Jaguar and Land Rover, appear to be doing more harm than good for the company right now… the two British marques have been … spreading red ink over Tata’s books…Tata’s end of financial year results, incorporating Jaguar and Land Rover for the first time, reveal that India’s largest car company is carrying a loss for the first time in seven years…Globally Land Rover sales have fallen 39 percent…In Australia the June 09 VFACTS figures reveal that Land Rover has sold 377 vehicles (YTD), down 27.9 percent…Tata is currently seeking a £340 million (AU$697.9 million) loan from the European Investment Bank to support the two British brands, however it is estimated that up to AU$1.2 billion dollars could be required with additional funds required in coming years. Motor Report
How long can Tata continue to suffer a half a Billion Dollar loss? The obvious answer will be to cut employees and transfer the jobs to Bharat. The British Unions will be highly resistant to that and this contractual violation will surely not go well from the company. Already British Prime Minister has talked to Tata about its threats to close down the factories in Britian. This affects more than 14,000 British families who are up in arms against Delhi.
“The numbers are extremely disappointing,” said Mohit Arora, senior director at JD Power, the car consultancy. “… It is a wake-up call for [Tata].”
More worrying for the markets was the fact that Tata group has been forced to pour £821m ($1.35bn) into its new acquisition to cover losses. The purchase has also left the group with a debt overhang, with 50 per cent of its Rs163bn of debt due by 2011. Financial Times
Tata has few options. It can spin off the losing ventures, or it can move the factories to Bharat. How many Bharatis can afford $120,000 car? With the per capita GNP below a thousand Dollars, it would take an ordinary Indian a century to save up for a car!
But analysts believe that, at least in the short-term, Jaguar and Land Rover will be millstones around the neck of Tata Motors.
Nomura estimated that the two marques would need an injection of Rs43.8bn this financial year and, even after assuming a sharp recovery, would continue to require additional cash.
“Jaguar and Land Rover may continue to destroy value for Tata Motors’ shareholders, either in the form of significant debt-raising at a standalone level or through equity issue,” the brokerage said, maintaining a sell on the stock.
Domestic brokerage Angel Research warned that Tata Motors’ net debt was now 5.8 times equity, “which we believe is substantially high and would keep its cash flow under pressure at least for the next couple of years”.
The question persists whether Tata Motors should have completed the acquisition at all. Financial Times
Nick Kurczewski for The New York Times Ratan Tata, the chairman of Tata Motors, stands far left with Jaguar Land Rover executives at the brands’ introduction in India.Tata Motors has introduced its Jaguar and Land Rover brands in India, one of the world’s fastest-growing automobile markets. But the celebratory announcement to mark the occasion has been tempered by plummeting sales and the threat of job cuts and factory closures at both brands.
For the first time in eight years, Tata reported an annual loss. The culprit: a $504 million drain inflicted by struggling Jaguar Land Rover on the Indian company’s bottom line. Tata bought the historic brands for $2.3 billion from Ford in March 2008.
…Sales of luxury sedans and S.U.V.’s – core to the Jaguar Land Rover portfolio – have been hit especially hard. According to Reuters, during a 10-month period ending in March, Jaguar Land Rover sales fell to 167,000 vehicles, compared to 246,000 in the same period the previous year.
Mr. Tata maintained his optimism during ceremonies held last Sunday welcoming the British makes to India. “We at Tata Motors are proud to have these brands,” he said, according to The Economic Times, saying it was a “terrific decision.”
Keith Bedford/Bloomberg News Tata Motors is better known for economical cars, like the Nano.But questions linger as to how Tata — relatively unknown outside of India and a specialist in budget-minded vehicles — can align its operations with two British companies synonymous with prestige, power and a well-heeled clientele.
Base versions of the Tata Nano city car start at $2,200 (taxes and fees included), whereas prices for Jaguar Land Rover products in India will begin at more than $120,000. While the Nano has been well received by the media – including my test driveof the range-topping LX version – the fact remains that the tiny four-door has none of the frills (and even less of the social status) typical to Jaguar and Land Rover vehicles.
The Indian lineup of Jaguar and Land Rover vehicles will include the XF and XFR sedans, sporty XKR coupe, Land Rover Discovery 3 and the Range Rover S.U.V. Tata Motors said it would develop a dealer network for Jaguar Land Rover this year and next. According to a report in The Business Standard, Land Rover is also negotiating with the Indian government to supply military vehicles to the armed forces.
That news might provide little relief for Jaguar Land Rover employees in Britain. The Birmingham Post reports that Prime Minister Gordon Brown of Britain has held talks with Tata regarding the company’s threats to close British factories to stem the flow of red ink. Belt-tightening by Tata could also put a crimp on the development of future models, such as a hybrid version of the Jaguar XJ sedan and an eco-themed XE sports car. Tata Introduces Limping Luxury Brands to India By Nick Kurczewski
Rupee News already predicted the failure when Tata made the purchase.
Just when many thought Tata’s run of bad luck might be nearing its end, India’s largest conglomerate was this week forced to shift the venue of the glamorous launch of its newly acquired Jaguar and Land Rover brands in India.
The event had to be quickly switched to the group’s Taj President Hotel in Mumbai after its flag-ship property, the Taj Mahal Palace and Tower Hotel, caught fire the night before. Financial Times
The cash crunch will mean fewer Dollars for Research and Development.. The emotional purchase made no business sense at all and the millstone around Tata will take more than a decade to convert into profit. By that time, the technology will be totally obsolete.
First off, the luxury automotive sector makes up less than 1% of the Indian market. Secondly, the base model Jaguar XF and Land Rover Discovery start off at 6.3 million rupees (around $131,000) in a land riddled with poverty. Joining the XF and Land Rover Discovery are the brand’s respective XK and Range Rover lineups.Tehran Times. (Source: Reuters)
Granted, there are the rare entertainers and well-heeled folk looking for a slick British ride, so there probably won’t be goose eggs on the JLR sales books. The pair will likely be low-volume niche brands, akin to Bentley or Rolls-Royce in the rest of the world.
Last Friday, Tata Motors posted a loss of $520 million for the financial year ending last March and is seeking a $563 million loan from the European Investment Bank to help bolster its Jaguar Land Rover divisions. JLR has lost a total of $504 million during the same fiscal year.
Tata Takeover story a few months ago:-Treasure to Trash. Jaguar joins Junk. Rover renamed Rubble. The product life-cycle is now complete. British haut monde treasure is transformed to trash as Tata takes over of brands that used to be premium brands for the English aristocracy.
Good riddance to bad rubbish. Ford stock rises.
Acquisition of junk with a $3 Billion loan. Tata stock goes down.
What started out as luxury brands hard-crafted for only the richest of the glitterati has been taken over by former junkyarders Tata of India. Tata started out as junk collectors in India. Then they moved to the Textile industry. They monopolized the junk trade and moved on up the life-cycle into steel imports. During the Socialistic policies of Nehru, Tata was able to monopolize the automobile trade in India Mostly trucks). They purchased old discarded plants and manufactured the vehicles from 1947 all the way up to the 80s. For about 4 decades a few manufacturers monopolized the automobile trade in India.
PAL, Tata and Hindustan Motors were one of the few manufacturers of Tata, Tata trucks, Ambassador and Hindustan brands of automobiles.
For forty years, while Toyota moved from almost nothing to the largest manufacturer of the world Tata kept on doling out the same model of cars and Truck without any significant improvement of the product or design.
This monopoly of the automobile business, allowed Tata to venture into other monopolies like Tea and enabled Tate to purchase Tetley Tea in England. It also made a small acquisition of part of Daewoo.
In half a century, Tata was unable to come up with any product that the world wanted to purchase. With a captive audience in India, a huge population and stringent restrictions on imports Tata could have been the Toyata of Asia. Half a century later, Tata Automobile seems to have emerged from its Rip Van Winkle sleep and has now tried to catch up by purchasing products in the market. It is as if a student who has been a failure in high-school tries to impress his class makes by spending an inordinate amount of money. Analysts all over the world disagree with the strategy, which seems to be based on emotion than sound business practices.
The Tata monopoly was hit hard with the opening up of the Indian market in the 80s. Guess what, Tata was the biggest importer of automobiles into India, bringing in Suzuki and other brands. Recently Tata introduced a new car called Tata Nano which may become a reality sometime in the future. According to the Economic times of India”For years, critics termed Tata’s vehicle business as a millstone around the neck.”
Ford purchased several brands and has been unable to transform any of them or to use them for any significant value. Fords acquisition of Volvo has not achieved the results that Ford wanted. Ford was unable to capitalize on the failing brands called Jaguar and Land Rover.
The reason Ford acquired Jaguar and Land Rover was because the companies were failing and the consumers were not interested in unreliable cars. Jaguar had acquired a reputation of being the second car, because one always needed another car to make sure one could get to work or school.
Bloomberg reports the following:
“These are vanity products and probably these brands will have a tough time in a weak economy..Tata “will have trouble doing well in this sort of environment,” Edwin Merner, who oversees $2 billion as president of Atlantis Investment Research Corp. in Tokyo.
“Turning around Jaguar will be a major challenge,” said Ashvin Chotai, an independent London-based analyst specializing in Asian automakers. “Tata will need to tread carefully and ensure there is no negative impact on these brands.”
According to analysts, the pessimism goes beyond the cyclical issues. There are inherent problems with Land Rover and Jaguar. These brands failed decades ago. Acura, Infinity, Kia and Hyundai luxury models drove these automobile manufacturers to bankruptcy.
From a business point of view acquisition of either Land Rover or Jaguar does not make any sense at all. Tata paid about $2.3 Billion for the two brand names. According to automobile analysts it paid $2.3 Billion too much. From a technology perspective, neither Land Rover nor Jaguar offer any substantive gain to the purchaser. That is the reason why none of the Korean or Chinese companies were interested in acquiring these archaic brands. It would be logical for the brands to be sold to a company that has nothing to lose. Surely not its reputation.
“Jaguar has been nothing but a financial millstone.” Peter Schmidt, managing director of U.K. consulting firm Automotive Industry Data.
According to the Guardian “Few remember that Tata’s first car 10 years ago, the Indica, was little more than a noisy box on wheels. It was instantly dubbed “Ratan’s folly.” Guardian also says “Tata and Jaguar are worlds apart – a premier brand bought by an aggressive upstart. Dealerships in North America made clear that customers might balk at buying a Jaguar that was made under Indian ownership.Similarly when Tata’s hotels division offered to buy Orient-Express Hotels, a global luxury chain, the British-run company responded by saying “any association of our properties with your brands would result in a reduction of the value of our brands and our business”.
The two billion Dollar investment was hardly made on a return on investment (ROI) measurements. There is no ROI on these acquisitions. This was probably an emotional deal that tries to place Tata on the automobile manufacturing map. The Jaguar and Land Rover plants require massive investments which Tata will be unable to to. The Tata management announced that it will not interfere with the management of the companies.
