The k2p blog

When the Tata Group with Ratan Tata acquired Jaguar Land-Rover (JLR) in 2008 there were many disturbing and even depressing omens. The financial crisis of 2008 was just beginning to emerge. JLR was bleeding cash and Ford Motor Company were happy to bail out for the $2.3 billion that the Tata Group paid. In India Tata shareholders and analysts were concerned that they had bitten off more than they could chew. The Tata Group had relatively low debt and the levels of debt that they would have to take on not only for the acquisition but almost as much again for investment in JLR raised the fears that JLR could bring not only Tata Motors but the whole group down. The price was seen as being too high for what was considered a “vanity” acquisition. In the UK there were fears that the strong Jaguar and Land-Rover brands would be hurt badly by coming under Indian ownership. Jobs would be lost to Mumbai and technology would be stolen the story went. The company culture would be destroyed and innovation would come to an end. How could an Indian company messing around with a car like the Nano have the audacity to think that they could offer anything to two thoroughbred brands such as Jaguar and Land-Rover?

But 3 years on the story of JLR under Tata is an island of optimism in a gloomy sea. And it is not just optimism. The “vanity” acquisition has a gilded edge. JLR profits are up sharply and it contributes more than 50% of Tata Motors profits. An Indian company that dealt primarily with cheap small cars and trucks succeeded where Ford Motor Co and few others before had failed.

The Telegraph: Jaguar Land Rover is poised to deliver a major boost to the Government’s plans to boost growth by confirming this week that it will build a £400m engine plant in the Midlands that will potentially create up to 2,000 jobs.

JLR’s fortunes have undergone a dramatic transformation under the ownership of Indian group, Tata Motors, which bought Jaguar and Land Rover from Ford in 2008. …. 

The company was forced to turn to the Government for support in 2009 when car sales around the world crashed, but walked away from negotiations when Lord Peter Mandelson, the trade secretary, demanded strict terms including the right to appoint the chairman. The company then secured debt from commercial lenders and was able to reap the benefits of a surge in demand for Jaguars and Land Rovers in Asia.

In the year to March 31, JLR made a record pre-tax profit of £1.1bn after increasing sales by 26pc to 243,621. Under the leadership of chief executive Ralf Speth and Tata chairman Ratan Tata, JLR is investing £1.5bn a year in new products and has ambitions to drive production at its three Midland plants to 500,000 vehicles a year. The company has already hired 3,000 staff this year, including a record 350 graduates, and now employs almost 21,000 people in the UK.

JLR’s engines are currently supplied by Ford from plants including Bridgend and Dagenham in the UK…… 

Mr Tata also played down the loss of Carl-Peter Forster, who has stepped down as Tata Motors chief executive. He said: “The credit for the turnaround of Jaguar Land Rover goes to the management team and workforce. No single person can or should take credit.”

And the culture-clash that was feared just did not happen. Instead a new spirit seemed to be infused into JLR. Kevin Stride, the chief engineer of the highly-acclaimed XF program said in 2009

“There’s a real buzz around the brand at the moment, Even in a difficult world, there’s a buzz because we’re feeling empowered, we’ve got the right product line-up to go and tackle the world and we’re gaining some confidence. 
“If you went to people at different function levels in Jaguar Land Rover and asked what they thought of Tata, you’d get a big thumbs-up. It’s a good place to be at the moment. For individuals like myself, it’s changed for the better. We had a great relationship under Ford. People were cynical about that, but they were a very good company to work for. With Tata, it’s different, but different in a good way. …. We are held accountable very clearly as an independent company, whether in engineering or marketing or finance, we are held accountable for proper business performance, which in the old regime was a little filtered. It was very difficult to see cause and effect. We were not able to be as focused as we are now. ….. Tata has a very healthy way of approaching all the businesses they own. They don’t centralise it, they don’t put layers of bureaucracy in it. They evaluate the business model; if they like it, they buy the company and demand that they deliver on the business plan. You can’t just meander off and fail. ……. Cultural change is the hardest thing to do. It does take time. But we’ve been with Tata for a year, we are more agile already, people (within JLR) are questioning why we do things and if it adds value, and we are feeling more empowered to go and attack it. If it doesn’t make any sense and it adds another layer, let’s not do it any more.

…. Since Tata have come in, we’ve now got an insight into how they deal with Indian sources and sources within the whole of South-East Asia. My perception is that they are extremely focused businessmen and extremely principled in what they do, which is great coaching for us as a company. We’ve gone and looked at how they operate as a company – how they source components, how they design them, how they manufacture them – and we’ve got quite a bit to learn from them on the business side.

Jaguar is able to offer an insight into quality processes in the premium world. In terms of our engineering simulation and development, we’re pretty advanced for a company the size of Jaguar Land Rover. That’s something we’ll be able to provide benefit to the Tata Group in years to come”.

And the story is far from over yet. While cash management is the mantra of the moment, there are ambitious plans for the introduction of new models and upgrades of the existing ones in a long-term plan that runs until 2014. Tata Motors and JLR are now in “very intensive discussions” with a leading Chinese car maker about forming a historic joint venture that would see the company also produce its luxury cars in China.

CarAdvice: With tough economic times hurting sales of Tato’s famous Nano, Jaguar Land Rover are now generating a massive 57 percent of Tata’s revenue. The British brands have seen their pretax profit increase 20-fold to 1.12 billion pounds ($1.76 billion) for the fiscal year. As it stands today, Tata and its Jaguar Land Rover division is valued at over $12 billion.

It wasn’t just a matter of good fortune that the brands have become successful, in fact, Jaguar is still striving to improve with sales down 27 percent for the last quarter. Land Rover on the other hand, has seen significant growth (up 22 percent for last quarter) following strong demand for its upmarket SUVs.

The Range Rover Evoque  has already seen more than 20,000 pre-orders, despite not going on sale till September.

Tata is investing a massive $2.5 billion into Jaguar Land Rover product development each year to keep the flow of new products coming. This should see Jaguar offer a significantly larger range to turn the sales slide around. The multi-billion dollar annual investment will see the development or upgrade of 40 new vehicles across the two brands over the next five years. The two that we look forward to the most are the Jaguar C-X75 supercar and an entry-level sedan to rival the Mercedes-Benz C-Class and BMW 3 Series.

The C-X75 is meant to showcase Jaguar’s engineering prowess and build its brand credibility to compete with its German rivals. The hybrid supercar can accelerate from 0-100km/h in under three seconds and run on electric power alone for around 50km: image CarAdvice.com.au

It will be tough for Jaguar to mount a serious challenge to Audi, BMW and Mercedes-Benz but perhaps with Tata Motors this is not impossible. And it will be a healthy and welcome development for the car industry.