Press Report : Tata Motors seeks advice on JLR division

John Reed in London and James Fontanella-Khan in Mumbai, Financial Times, 28th July, 2009

Tata Motors said yesterday that it had appointed KPMG and Roland Berger Strategy Consultants to advise it on cost-cutting and cash management at its loss-making Jaguar Land Rover luxury business. The move came as India’s biggest vehicle maker reported a 58 per cent rise in first-quarter profit , helped by asset sales and falling steel prices, which offset a drop in its car sales.

“We have appointed two consultancies who are working with us,” said the carmaker, owned by the Tata Group. “The exercise is on cash flow, cost controls, etcetera [and] this will bring about major improvement over a period of time.” Tata said the consultancies had been inside Jaguar Land Rover for just over two months.

“It’s a very hands-on approach, with every fortnight discussions [with the two consultants] to reach break-even point,” said Ravi Kant, Tata Motors’ Vice-Chairman. Mr Kant said the company had used part of its sale of 1.5 per cent of Tata Steel to repay $150m of an outstanding $1bn bridge loan it took to acquire Jaguar Land Rover .

Jaguar and Land Rover are reeling from the global collapse of luxury car sales. The carmakers reported a combined net loss of £673.4m ($1.1bn) in their core UK market last year. Tata Motors bought Jaguar Land Rover from Ford Motor for $2.3bn in June 2008, just as sales of larger vehicles were beginning to fall.

Tata Motors has done really well and I feel that on the domestic front they won’t have any major challenges. On the Jaguar Land Rover front, there are still some serious concerns and it is unclear when they will be able to turn things around.” Vaishali Jajoo, Autos Analyst at Angel Brokers in Mumbai

Tata Motors, which recently launched the Nano, the world’s cheapest car, beat analysts’ expectations as its net profit rose to Rs5.14bn ($107m), compared with Rs3.26bn a year ago, in spite of a 7.8 per cent drop in sales to Rs63.5bn. One of the main reasons for the rise in profit was Tata Motors’ sale of “long-term investments” – including the Tata Steel stake – which helped the group to raise Rs3.19bn.

Analysts said that Tata Motors’ positive first-quarter results did little to alleviate the problems the carmaker faces in the UK. “Tata Motors has done really well and I feel that on the domestic front they won’t have any major challenges,” said Vaishali Jajoo, Autos Analyst at Angel Brokers in Mumbai. “On the Jaguar Land Rover front, there are still some serious concerns and it is unclear when they will be able to turn things around.”

Tata Motors, JLR and the UK Government have been locked in long-running talks on state loan guarantees Tata says it needs to prop up the carmakers. They are now close to agreeing terms of a state guarantee for a £175m commercial bank loan that would be granted under Britain’s £2.5bn automotive assistance programme , according to people close to the talks.

[Source: Financial Times]

Clive Goldthorp

About the Author:

Clive claims that his interest in the BMC>MG story dates back to his childhood in the 1960s when the family’s garage premises were leased to a tenant with an Austin agency. However, back in the 1920s and 1930s, his grandmother was one of the country’s first female Garage Proprietors so cars probably run in his genes! Admits to affairs with Alfa Romeos, but has more recently owned an 06/06 MG TF 135 and then a 15/64 MG3 Style… Clive, who was AROnline’s News Editor for nearly four years, stood down from that role in order to devote more time to various Motor Racing projects but still contributes articles on as regular basis as his other commitments permit.

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