James Fontanella-Khan in Mumbai and John Reed in London, FT.com, 31st August, 2009
Tata Motors, which is reporting a quarterly loss caused by sliding sales at Jaguar and Land Rover, said it planned to raise at least £100m ($163m) of working capital for the two ailing UK car brands.
Ravi Kant, the Indian carmaker’s Vice-President, said that cost-cutting advice for JLR from consultants KPMG and Roland Berger was bearing fruit but added that only a revival of the market for luxury cars could help the group turn around its business. Mr Kant also stated that Tata Motors was finalising the £100m of loans from commercial banks including Standard Chartered, Bank of Baroda, ING, GE Capital, and Bank of Ireland subsidiary Burdale.
Tata Motors reported a net loss of Rs3.29bn ($67m) for the quarter to end-June, compared with a Rs7.2bn profit a year ago. It said it made a standalone profit of Rs5.14bn, up 58 per cent on a year ago, not including the losses at JLR. The two brands lost Rs8.73bn before tax in the quarter due to “continued adverse automotive market conditions” during the quarter, Tata said. JLR’s wholesale sales in the quarter were 52 per cent lower than a year ago.
Analysts said it would take much more than £100m to turn around JLR’s fortunes, given the depressed state of the global premium car market. Tata’s core commercial vehicles market in India is also suffering from slower sales. “We’ve seen the bottom of the luxury market, but the road to recovery will be slow,” said Ashvin Chotai, Managing Director of London-based consultancy Intelligence Automotive Asia Limited. “JLR will continue to be a drain on Tata’s financial resources for a while.”
We’ve seen the bottom of the luxury market, but the road to recovery will be slow. JLR will continue to be a drain on Tata’s financial resources for a while.” Ashvin Chotai, Managing Director, Intelligence Automotive Asia Limited
JLR has been a burden for Tata since its carmaking arm bought the two brands from Ford Motor for $2.3bn last year, just as demand for large and expensive vehicles began to plummet. Since then, Tata has poured more than £1bn into the carmakers, which have three plants and employ 14,500 people. It has eliminated more than 2,200 jobs, and in July said it had appointed KPMG and Roland Berger to advise it on cost-cutting and cash management.
Last month Tata and JLR ended long-running discussions with the UK Government over emergency financing for the two carmakers. Tata had been seeking government guarantees for a £340m European Investment Bank loan to finance JLR’s investments in lower-emission products, including a planned compact Land Rover model, plus guarantees for up to £500m of commercial bank loans.
At the time, JLR said it had lined up commercial lending to meet its needs, including the EIB loan, and that it would no longer need UK Government guarantees. Tata had balked at conditions attached to any lending by the British Government.
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