CASE STUDY: Tata Motors Acquisition of Jaguar and Land Rover in 2008

Ford Motor Company is the third largest automobile producer worldwide and ten times the size of Tata Motors. The company is known for low-priced automobile with standard interchangeable parts.56) to raise the required funds without endangering its own finances. I believe that Tata Motors made a wise acquisition. .1B in capital allowances for taxes. and that it paid Ford slightly more than half of what it paid for the two brands. which was facing greater competition from other foreign brands. IP rights. 26 national sales companies. Tata Motors raised $3B through bridge loans through a number of banks. Assess the pros and cons of Tata Motors¶ acquisition of Jaguar and Land Rover. In September 2006. and $600M in pension contributions. which comprised of other brands including Aston Martin. However. It acquired JLR into its new group PAG. The shareholder¶s had a different perspective as they felt it was over priced and not confident that Tata¶s balance sheet could handle this new debt. safety focused and low fuel consumption. considering that the automotive market would eventually recover. The decision highlighted the fact that Ford had not accomplished its goal of penetrating into luxury brands. In order to facilitate the deal. including JP Morgan. 2 advanced design and engineering centers. but also more importantly. successfully acquired two British automotive brands ± Jaguar and Land Rover (JLR). Although analysts were skeptical about the deal mainly due to the economic slowdown in the major selling markets. Tata Motors had accumulated immense cash reserves (D/E ratio of 0. Volvo and Lincoln.3B. $1. How does the acquisition compare to other options the company could have pursued in terms of growth? Tata Motors main interest for the acquisition was not only to leverage past synergies and M&A knowledge. virtual manufacturing. Europe and North America. establish a global presence within the automotive sector and remove its dependency on the Indian market. Allan Mulally cleared the sale of brands within PAG as part of restructuring exercise called ³Way Forward´ in order to become more competitive. in June 2008 from Ford Motors for $ 2.Introduction India-based Tata Motors Ltd.Enclosed in the appendix is the timeline of major highlights for JLR and the deal process followed by Tata Motors. Citigroup and State Bank of India. 3 UK plants. Tata Motors gained 100% stake in companies. As part of the deal.

which would provide a supplier cost competitive advantage. which is used to determine whether the goals are achievable. c. (Daewoo) Experienced management capability and human resource capacity. SUV and luxury brands were the hardest hit. and removing its traditionally dependency on US and European markets. Corus Steel is the main supplier of high-grade steel to the automobile industry. d. Inexperienced in turning loss-making ventures. Several cons can be identified: a. JLR would broaden the current brand portfolio. - - . which contributed to 90% of Tata¶s revenue. Enclosed below is the Strengths and Weakness section of the SWOT analysis. BMW. especially given that it had immense capital expenditure due to the launch of Nano. Loan payment of $3 B for the acquisition. c. Will Tata Motors be able to achieve its desired results for purchasing Jaguar and Land Rover? This acquisition highlights the underlying need for Tata Group¶s global growth. d. Tata Group had acquired already successful brands. Lexus and Infinity. The two advanced design technology centers provide access to advanced technology and facilitate growth of Tata Motors¶ SUV market segment in India. Lack of global R&D and design capability. e. Reduce its dependence on the Indian market. Additionally. and subsequent rollover of this loan. Strong presence of competitors like Mercedes. STRENGTHS A strong reputation for successful acquisition and integration of other automotive companies.5X. and in particular. b. Establish a global footprint. and enter the high-end premier market segment. b. it indicated its long-term strategic commitment to the global automotive sector. WEAKNESS Inexperienced in luxury automobile branding. The synergistic presence of Corus Steel.Several pros can be identified: a. Increase in debt ratio from 1X to 2. Improved business diversification for JLR products across newer markets (SE Asia). Downturn in the economy and higher gas prices resulted in a 5% decrease in worldwide automotive market. all of who have an established presence within this market space. prior to the acquisition (except NELCO). An additional loss of $510 M of JLR during the 1st ten months of the acquisition.

Maintaining the JLR¶s current management team in order to facilitate the turn around as indicated by Ratan Tata. Tata Group. Reduce production costs of JLR. Considering the SWOT analysis. What challenges might it have to overcome? Enclosed below is the Threats section of the SWOT analysis. ³We are very pleased at the prospect of Jaguar and Land Rover being a significant part of our automotive business. Ratan Tata.- Strong balance sheets. Developing and creating brand value and experienced new product development and deployment process. Using existing JLR distribution channels to foster promoting of existing brands into the global market space. JLR¶s receding sales and brand image. Reduce risk profile with diversification and entry into different markets. Assess the merits of the approach Tata Motors planned to take with acquisition. We aim to support their growth. TACO and TCS. said. keeping their identities intact. Making JLR design and technology centers as Tata¶s global design HQ. . Economic downturn. while holding true to our principles of allowing management and employees to bring their experience to bear on growth of the business. Having already established a global presence with other products (Tetley and Corus) and successful integration with the holding company. THREATS Presence of well established competitors. Ability of successful introduction into other SE Asia markets. compared to its competitors. Chairman. due to diversified nonautomotive product portfolio. OPPORTUNITIES Improving capabilities of existing products by leveraging JLR¶s experienced design capability. which is used to determine whether the goals are achievable. which is used to determine whether the goals are achievable.´ Enclosed below is the Opportunities section of the SWOT analysis. who have already capacitized this market with their global brands. Tata motors approach to pre. Leveraging JLR¶s brand image to gage acceptance of Tata as a global brand. and volatility for new automotive entry products.and post acquisition is sound. What steps could it take to add value to the acquisition? On acquiring JLR. by introducing/utilizing Indian facilities for production. it is now only an exercise of realizing the threats and carefully defining a scope and plan to mitigate. resulting in decreased sales for the identified market segment. Established synergy of Corus. We have enormous respect for the two brands and will endeavor to preserve and build on their heritage and competitiveness.

php?option=com_content&task=view&id=2265&Itemid=2 http://trak. Although. References http://seekingalpha. which are stylish. . albeit a longer road than first anticipated. Additionally.businessweek. and being heavily marketed in the US. 4. rather than core competencies. JLR has 3 showrooms in India. which are targeted to attract the rising affluent class in India. Secondly. Having accomplished a brand and presence in both the cheapest and luxury brand categories. 2.com/article/216121-progress-report-tata-motors-and-jlr http://www. revised Range Rovers and XJ Saloon). these models were first conceived during Ford¶s reign.htm 1. The assembly is to take place at the company¶s Pimpri facility and to be rolled-out by July 2011. Additionally. I foresee a successful integration of the JLR brand with Tata Motors. Tata Motors plans to put a ³Made in India´ tag on its freshly designed JLR models to be assembled in India.com/globalbiz/content/aug2009/gb20090811_307608_page _2.in/tags/business/2010/07/01/land-rover-made-in-india/ http://www. Ratan Tata is creating a glorious vision for theglobal automotive market. 3. Conclusion (Progress Report) Land Rover has received a grant offer of Euro 27M to build small Range Rovers in the UK. indicates that Tata Motors has considered the whole spectrum and has now become an indomitable force to reckon with. 5.in/index. the media blitz by Tata Motors has gathered much anticipation. JLR has introduced new models (mid-size XF.docstoc.Given that the threats are more to do with the automotive industry.com/docs/22877996/TATA-PROJECT-AND-CORPORATEPPT http://machinist.

APPENDIX .

Ceribus Capital Management.Jaguar 1922 .Key Timeline . Likely Buyers identified as: Tata Motors. Apollo Management. Top Bidders: Tata Motors ($2.75B Acquisition Timeline/Deal Process ± Tata Motors 12/06/2007 ± Announcement from Ford to sell JLR a. b. M&M.Floated off as a separate co in the stock market 1990 ± Acquired by Ford for $2.Land Rover 1948: Land Rover is designed by the Rover Car Company 1976: One-millionth Land Rover leaves the production line 1994: Rover Group is taken over by BMW 2000: Acquired by Ford for $2. rarely advertised.5B in 1989 A statement of ultra luxury. TPG Capital.Ford agreed to sell their Jaguar Land Rover operations to Tata Motors.Jaguar name first appeared in 1935 1975 . Holds Royal warrants. Ford¶s formula one entry since 1990s Key Timeline .05B) and M&M ($1.Nationalized in due to financial difficulties 1984 . 02/06/2008 ± The acquisition is complete .9B) 03/01/2008 ± Ford announces Tatas as the preferred bidders 26/03/2008 .Founded in Blackpool as Swallow Sidecar company 1960 .

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