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Project Report on

MERGER AND ACQUISITION OF TATA MOTORS AND JLR

In partial fulfillment of requirement for the


Award of Degree of M.Com

Subject:
STRATEGIC MANAGEMENT
Submitted By:
Mr. Vicky Singh
Roll No. 08
M.Com. Part I, Semester - II

Under the Guidance of:


Prof. Mr. Sunil Lalchandani
SMT. CHANDIBAI HIMATHMAL MANSUKHANI COLLEGE
ULHASNAGAR 421003

UNIVERSITY OF MUMBAI
2014 2015

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This is to certify that, Mr. Vicky Singh of M.Com Part II, has successfully
completed the project in Strategic Management titled Mergers And
Acquisitions of Tata Motors And JLR under my guidance for the academic year
2014-15. The information submitted is true and original as per my knowledge.

Mr. Sunil Lalchandani


(Internal Guide)
Prof. Gopi Shamnani
(Coordinator, M.Com)

Dr. Padma V. Deshmukh


(I/C Principal)
________________
External Examiner

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DECLARATION

I, Mr. Vicky Singh student of SMT. CHANDIBAI HIMATMAL MANSUKHANI


COLLEGE, ULHASNAGAR studying in M.Com Part I, Semester II, hereby
declare that I have completed this project on Mergers And Acquisitions of Tata
Motors And JLR for the subject Strategic Management in the academic year
2014-15.The information submitted is true and original to the best of my
knowledge.

_______________
Mr. Vicky Singh

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ACKNOWLEDGEMENT

The satisfaction, which accompanies the successful completion of the project, is


incomplete without the mention of a few names. I take this opportunity to
acknowledge the efforts of the many individuals who helped us make this project
possible.

I would like to express our sincere gratitude to our Prof. Sunil Lalchandani for
giving us an opportunity to work under esteemed guidance which helped me to
improve upon our lacunae during the project research. I am very grateful to him for
providing us with every possible opportunity & freedom to learn and explore. I am
deeply indebted to him for suggestions, constant inspiration and encouragement.

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EXECUTIVE SUMMARY:

India-based Tata Motors Ltd. announced that it had completed the acquisition of the two iconic
British brands - Jaguar and Land Rover (JLR) from the US-based Ford Motors for US$ 2.3
billion. Forming a part of the purchase consideration were JLR's manufacturing plants, two
advanced design centers in the UK, national sales companies spanning across the world, and also
licenses of all necessary intellectual property rights.
There was widespread skepticism in market over an Indian company owning the luxury brands.
According to industry analysts, some of the issues that could trouble Tata Motors were economic
slowdown in European and American markets, funding risks, currency risks etc. Market
conditions were extremely tough, especially in the key US market. Tatas needed to invest a lot in
brand building to make JLR profitable. Onset of recession not only made investment look
mistimed, but also started wiping out the JLR market.

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INDEX
Sr.No

Particulars

Page No

Introduction

08

About Tata Motors

10

About Ford Motor Company

15

About Jaguar Land Rover

18

Why Is Ford Selling?

26

The Reason Behind Decision To Acquire

29

The Deal Process

30

Post Merger

34

Fund Raising

37

10

SWOT ANALYSIS

39

11

Business Transformed Over Last Five Years

40

12

Conclusion

42

13

Bibliography

43

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INTRODUCTION
MERGERS AND ACQUISITIONS

The phrase mergers and acquisitions (abbreviated M&A) refers to the aspect of corporate
strategy, corporate finance and management dealing with the buying, selling and combining of
different companies that can aid, finance, or help a growing company in a given industry grow
rapidly without having to create another business entity.

WHAT DOES MERGER MEAN?


The combining of two or more companies, generally by offering the stockholders of one
company securities in the acquiring company in exchange for the surrender of their stock

INVESTOPEDIA EXPLAINS MERGER


Basically, when two companies become one. This decision is usually mutual between both firms.

WHAT DOES ACQUISITION MEAN?


A corporate action in which a company buys most, if not all, of the target company's ownership
stakes in order to assume control of the target firm. Acquisitions are often made as part of a
company's growth strategy whereby it is more beneficial to take over an existing firm's
operations and niche compared to expanding on its own. Acquisitions are often paid in cash, the
acquiring company's stock or a combination of both.

INVESTOPEDIA EXPLAINS ACQUISITION


Acquisitions can be either friendly or hostile. Friendly acquisitions occur when the target firm
expresses its agreement to be acquired, whereas hostile acquisitions don't have the same
agreement from the target firm and the acquiring firm needs to actively purchase large stakes of
the target company in order to have a majority stake.

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In either case, the acquiring company often offers a premium on the market price of the target
company's shares in order to entice shareholders to sell. For example
1. Tata Steels mega takeover of European steel major Corus for $12.2 billion. The biggest
ever for an Indian company. This is the first big thing which marked the arrival of India
Inc on the global stage. The next big thing everyone is talking about is Tata Nano.
2. Vodafones purchase of 52% stake in Hutch Essar for about $10 billion. Essar group still
holds 32% in the Joint venture.
3. Hindalco of Aditya Birla groups acquisition of Novellis for $6 billion.
4. Ranbaxys sale to Japans Daiichi for $4.5 billion. Sing brothers sold the company to
Daiichi and since then there is no real good news coming out of Ranbaxy.

5. ONGC acquisition of Russia based Imperial Energy for $2.8 billion. This marked the turn
around of Indias hunt for natural reserves to compete with China.

6. NTT DoCoMo-Tata Tele services deal for $2.7 billion. The second biggest telecom deal
after the Vodafone. Reliance MTN deal if went through would have been a good addition
to the list.

7. HDFC Bank acquisition of Centurion Bank of Punjab for $2.4 billion.

8. Wind Energy premier Suzlon Energys acquistion of RePower for $1.7 billion.

9. Reliance Industries taking over Reliance Petroleum Limited (RPL) for 8500 crores or
$1.6 billion.

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TATA MOTORS

Tata Motors is India's largest automobile company, with consolidated revenues of Rs 2, 33,662
crore (USD38.6 billion) in 20013-14. Through subsidiaries and associate companies, Tata
Motors has operations in the UK, South Korea, Thailand and Spain. Among them is Jaguar Land
Rover, the business comprising the two iconic British brands. It also has an industrial joint
venture with Fiat in India.
It is a leader in Commercial Vehicles in each segment and among the top players in Passenger
Vehicles with winning products in the compact, midsize car and utility vehicle segments.
Tata Motors is the country's market leader in commercial vehicles and among the top three in
passenger vehicles. It is also the world's fourth largest manufacturer of medium / heavy
commercial vehicles, and the second largest bus manufacturer. Tata cars, buses and trucks are
being marketed in several countries in Europe, Africa, the Middle East, South Asia, South East
Asia and South America.
The company, formerly known as Tata Engineering and Locomotive Company, began
manufacturing commercial vehicles in 1954 with a 15-year collaboration agreement with
Daimler Benz of Germany. It has, since, developed Tata Ace, India's first indigenous light
commercial vehicle, Tata Safari, India's first sports utility vehicle, Tata Indica, India's first
indigenously manufactured passenger car, and the Nano, the world's cheapest car.
The foundation of the Companys growth over the last 68 years is a deep understanding of
economic stimuli and customer needs, and the ability to translate them into customer-desired
oerings through leading-edge R&D. With over 4,500 engineers, scientists and technicians the
companys Engineering Research Centre, established in 1966, has enabled pioneering
technologies and products. The Company today has R&D centres in Pune, Jamshedpur,
Lucknow, Dharwad in India, and in South Korea, Italy, and the UK.

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Areas Of Business:
Tata Motors makes passenger cars, multi-utility vehicles and light, medium and heavy
commercial vehicles.

Passenger cars: The Company launched the compact Tata Indica in 1998, the sedan
Indigo in 2002 and the station wagon Indigo Marina in 2004. Tata Motors also distributes
Fiats cars in India.

Utility vehicles: The Tata Sumo was launched in 1994 and the Tata Safari in 1998.

Commercial vehicles: The commercial vehicle range extends from the light two-tone
truck to heavy dumpers and multi-axle vehicles in the above 40-tonne segment.

Passenger buses: The Company also manufactures and sells passenger buses, 12-seaters
to 60-seaters, in the light, medium and heavy segments.

Joint Ventures, Subsidiaries, Associates:


Tata Motors has joint ventures with Marcopolo, the Brazil-based maker of bus and coach bodies,
and with Fiat Auto (to build a commercial vehicle at Fiat's facilities in Crdoba, Argentina).

Other associates include:

Tata Daewoo Commercial Vehicle Company, a 100-per cent subsidiary of Tata Motors in
the business of heavy commercial vehicles.

Tata Motors European Technical Centre is a UK-based, 100-per cent subsidiary engaged
in design engineering and development of products.

Telco Construction Equipment Company makes construction equipment and allied


services. Tata Motors has a 60 per cent holding; the rest is held by Hitachi Construction
Machinery Company, Japan

Tata Technologies provides specialized engineering and design services, product


lifecycle management and product-centric information technology services

Tata Motors (Thailand) is a joint venture between Tata Motors (70 per cent) and
Thonburi Automotive Assembly Plant Co (30 per cent) to manufacture and market the
companys pickup vehicles in Thailand.
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Tata Cummins manufactures high horsepower engines used in the companys range of
commercial vehicles.

HV Transmissions and HV Axles are 100-per cent subsidiaries that make gearboxes and
axles for heavy and medium commercial vehicles.

TAL Manufacturing Solutions is a 100-per cent subsidiary that provides factory


automation solutions and designs and manufactures a wide range of machine tools.

Hispano Carrocera is a Spanish bus manufacturing company in which Tata Motors has a
21-per cent stake.

Concorde Motors is a 100 per cent subsidiary retailing Tata Motors range of passenger
vehicles.

Tata Motors Finance is a 100 per cent subsidiary in the business of financing customers
and channel partners of Tata Motors.

Tata Motors' plants are located at Jamshedpur (eastern India), Pune and Sanand (west), and
Lucknow and Pantnagar (north). Tata Motors and Fiat have set up a common manufacturing
facility at Ranjangaon, near Pune.
Tata Motors is a part of the Tata Group manages its share-holding through Tata Sons. Tata
Motors is the largest multi-holding automobile company in India and it is the fourth largest truck
producer in the world. In addition, Tata Motors is also the second largest bus producer in the
world, with the revenues of US$ 8.8 billion in the financial year 2008. Since its establishment in
1945, Tata Motors has grown significantly in the past 60years with the strategies of joint venture,
acquisition and launched new products in different market segments (i.e. passenger cars,
commercial vehicles and utility vehicles).
A significant breakthrough for Tata was the development and commercialization of the truly
Indian cars and they are Tata Indica (1998) and Tata Indigo (2002). Tata Motors has experienced
many joint ventures with Daimler Benz, Cummis Engine Co. Inc., and Fiat and successfully
acquired Daewoo Commercial Vehicle Co. Ltd. In the year 2008, there were two most
significant events which have had a momentous impact on the scale of the Companys operations
and its global image. The launching of Tata Nano, the world cheapest car and the acquisition of

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Jaguar and Land Rover, the two iconic British brand have made Tata Motors well known to the
people in the world.

TATA MOTORS A SNAPSHOT

TATA GROUP is 150 year old, Previously Tata Engineering and Locomotive Company,
Telco.
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India's largest passenger automobile and commercial vehicle.

Tata Motors was established in 1945

Listed on the New York Stock Exchange in 2004.

TATA MOTORS Company Profile

It is the 5th largest medium and heavy commercial vehicle manufacturer in the world.
listed in BSE, NSE & NYSE.

Subsidiaries

JAGUAR CARS

LAND ROVER

TATA DAEWOO COMMERCIA

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FORD MOTOR COMPANY

The Ford Motor Company (commonly


referred to as simply Ford) is an American
multinational automaker headquartered in
Dearborn, Michigan, a suburb of Detroit. It
was

founded

by

Henry

Ford

and

incorporated on June 16, 1903. The


company sells automobiles and commercial vehicles under the Ford brand and most luxury cars
under the Lincoln brand. Ford also owns Brazilian SUV manufacturer, Troller, and Australian
performance car manufacturer FPV. In the past it has also produced tractors and automotive
components. Ford owns a 2.1% stake in Mazda of Japan, an 8% stake in Aston Martin of the
United Kingdom, and a 49% stake in Jiangling of China. It also has a number of joint-ventures,
two in China (Changan Ford Mazda and Ford Lio Ho), one in Thailand (Auto Alliance
Thailand), one in Turkey (Ford Otosan), and one in Russia (Ford Sollers). It is listed on the New
York Stock Exchange and is controlled by the Ford family, although they have minority
ownership. It is described by Forbes as "the most important industrial company in the history of
the United States."

Ford introduced methods for large-scale manufacturing of cars and large-scale management of an
industrial workforce using elaborately engineered manufacturing sequences typified by moving
assembly lines; by 1914 these methods were known around the world as Fordism. Ford's former
UK subsidiaries Jaguar and Land Rover, acquired in 1989 and 2000 respectively, were sold to
Tata Motors in March 2008. Ford owned the Swedish automaker Volvo from 1999 to 2010. In
2011, Ford discontinued the Mercury brand, under which it had marketed entry-level luxury cars
in the United States, Canada, Mexico, and the Middle East since 1938.

Ford is the second-largest U.S.-based automaker (preceded by General Motors) and the fifthlargest in the world based on 2010 vehicle sales. At the end of 2010, Ford was the fifth largest
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automaker in Europe. Ford is the eighth-ranked overall American-based company in the 2010
Fortune 500 list, based on global revenues in 2009 of $118.3 billion. In 2008, Ford produced
5.532 million automobiles and employed about 213,000 employees at around 90 plants and
facilities worldwide.

The company went public in 1956 but the Ford family, through special Class B shares, still retain
40 percent voting rights.

Henry Ford's first attempt at a car company under his own name was the Henry Ford Company
on November 3, 1901, which became the Cadillac Motor Company on August 22, 1902, after
Ford left with the rights to his name. The Ford Motor Company was launched in a converted
factory in 1903 with $28,000 in cash from twelve investors, most notably John and Horace
Dodge (who would later found their own car company). During its early years, the company
produced just a few cars a day at its factory on Mack Avenue in Detroit, Michigan. Groups of
two or three men worked on each car, assembling it from parts made mostly by supplier
companies contracting for Ford. Within a decade the company would lead the world in the
expansion and refinement of the assembly line concept; and Ford soon brought much of the part
production in-house in a vertical integration that seemed a better path for the era.

Henry Ford was 39 years old when he founded the Ford Motor Company, which would go on to
become one of the world's largest and most profitable companies, as well as being one to survive
the Great Depression. As one of the largest family-controlled companies in the world, the Ford
Motor Company has been in continuous family control for over 100 years.

After the first modern automobile was already created in the year 1886 by German inventor Carl
Benz (Benz Patent-Motorwagen), more efficient production methods were needed to make the
automobile affordable for the middle-class; which Ford contributed to, for instance by
introducing the first moving assembly line in 1913.

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In 1908 Ford introduced the first engine with a removable cylinder head, in the Model T. In
1927, Ford introduced the Model A, the first car with safety glass in the windshield. Ford
launched the first low priced V8 engine powered car in 1932.

The creation of a scientific laboratory in Dearborn, Michigan in 1951, doing unfettered basic
research, lead to Ford's unlikely involvement in superconductivity research. In 1964 Ford
Research Labs made a key breakthrough with the invention of a superconducting quantum
interference device or SQUID.

Ford offered the Lifeguard safety package from 1956, which included such innovations as a
standard deep-dish steering wheel, optional front, and, for the first time in a car, rear seatbelts,
and an optional padded dash. Ford introduced child-proof door locks into its products in 1957,
and in the same year offered the first retractable hardtop on a mass-produced six-seater car. The
Ford Mustang was introduced in 1964. In 1965 Ford introduced the seat belt reminder light.

With the 1980s, Ford introduced several highly successful vehicles around the world. During the
1980s, Ford began using the advertising slogan, "Have you driven a Ford, lately?" to introduce
new customers to their brand and make their vehicles appear more modern. In 1990 and 1994
respectively, Ford also acquired Jaguar Cars and Aston Martin. During the mid- to late 1990s,
Ford continued to sell large numbers of vehicles, in a booming American economy with a
soaring stock market and low fuel prices.

With the dawn of the new century, legacy healthcare costs, higher fuel prices, and a faltering
economy led to falling market shares, declining sales, and diminished profit margins. Most of the
corporate profits came from financing consumer automobile loans through Ford Motor Credit
Company.

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JAGUAR LAND ROVER

Jaguar Land Rover Automotive PLC is a British multinational automotive company


headquartered in Whitley, Coventry, United Kingdom, and a subsidiary of Indian automaker
Tata Motors. Its principal activity is the design, development, manufacture and sale of vehicles
bearing the Jaguar and Land Rover (including Range Rover) marques. Both marques have long
and complex histories prior to their merger going back to the 1940s, first coming together in
1968 as part of the ill-fated British Leyland conglomerate; and later existed independent of each
other as subsidiaries of BMW (in the case of Land Rover), and Ford Motor Company (in the case
of Jaguar); Ford later acquired Land Rover from BMW in 2000 following the break-up of the
former Rover Group; which was effectively the remainder of British Leyland.

Jaguar Land Rover has been a wholly owned subsidiary of Tata Motors since 2008, when the
latter acquired it from Ford. It sold a total of 462,678 vehicles during 2014, comprising 381,108
Land Rover vehicles and 81,570 Jaguar vehicles.
Jaguar Cars is one of the worlds premier manufacturers of luxury saloons and sports cars. Land
Rover has been manufacturing 4x4s since 1948. Its products have defined the segments in which
they operate.
A core subsidiary of Tata Motors
Represents approximately two-thirds of TMLs revenues
Chairman, Vice-Chairman and CEO of TML sit on Jaguar Land Rovers board of
directors.
TML and Tata Group have supported JLR during the downturn

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Synergies
Access to a wider pool of financing banks and sources of funding as part of TML
Access to long-established operational and sales expertise of TML in India
JLR has established a product development operation in India
Since April 2011, Freelander vehicle kits have been assembled by TML in a complete
knock down facility in India.

A Growing Technical Capability:


Comprehensive vehicle Product Development capability (5 new models in last 5 years)
Petrol engine engineering and power train application capability for petrol and diesel
Product Development staff c.3,400
Flexibility to balance resources across product portfolios at different stages of their life
cycles
An industry leader in aluminium body structure and all-terrain technology
Leveraging architectures for multiple vehicles
Growing advanced research capability
Winners of 2008 Queens Award for Innovation for Land Rover Terrain Response
System.

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Areas Of Business
Jaguar Land Rovers manufacturing facilities are in the UK. The Jaguar Land Rover business
employs over 16,000 people, predominantly in the UK, including some 3,500 engineers at two
product development centres, in Whitley in Coventry and Gaydon in Warwickshire.
The Jaguar XF, XJ and XK models are manufactured at the company's Castle Bromwich plant in
Birmingham, UK, while the Jaguar X-TYPE is produced alongside the Land Rover Freelander 2
at the Halewood plant in Liverpool, UK. Land Rover's Defender, Discovery 3, Range Rover
Sport and Range Rover models are all built at Solihull, UK.

The business is a major wealth generator for the UK, with 78 per cent of Land Rovers exported
to 169 countries and 70 per cent of Jaguars exported to 63 countries. Sales to customers are
conducted principally through franchised dealers and importers.

History
The Jaguar Cars and Land Rover businesses were first united under a single entity by Ford Motor
Company in 2002. Ford had acquired Jaguar Cars in 1989 and Land Rover from BMW in 2000.
In 2006 Ford purchased the Rover brand name and logos from BMW for around 6 million. This
reunited the Rover and Land Rover brands for the first time since the Rover group was broken up
by BMW in 2000, and also brought Jaguar into the same stable as Rover/Land Rover more than
15 years after it was spun out from the former British Leyland in 1984.

Jaguar and Land Rover, two of the most iconic British brands, were sold by Ford to Tata Motors
in 2008. Here is a potted history of both:

1922 - Jaguar Cars Limited, a luxury car manufacturer based in Coventry, is founded as the
Swallow Sidecar Company by two motorcycle enthusiasts.

1945 - Swallow Sidecars changes its name to Jaguar, and the first Jaguars with high-performance
engines are produced.
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1947 - Land Rover, a British all-terrain vehicle manufacturer, rolls out its first vehicle,
apparently based on an American jeep from the Second World War. The Land Rover's distinctive
bodies were lightweight and rustproof, and designed to be field-serviced, giving the vehicles a
reputation for longevity in tough conditions.
Although Land Rover became famous for bringing 4x4 capabilities to civilian vehicles, since the
company's beginning all Series and Defender models have been used in a military capacity as
well.

1950s - Jaguar makes its name with a series of elegant sports cars and premium saloons, such as
the XK 150.

1961 - Arguably the most famous sports car of all time, the Jaguar E-type, first hit the road.

1968 - Jaguar merges with British Motor Corporation, subsequently taken over by Leyland,
which itself was later nationalised as British Leyland.

1970 - Land Rover launches the Range Rover.

1984 - Jaguar is split off from British Leyland and listed on the London Stock Exchange.

1988 - Land Rover launches the Discovery.

1989 - Jaguar is acquired by Ford.

1997 - Land Rover launches the Freelander.

1990s - Jaguar undergoes a programme of modernisation and expansion that ensured the
broadest product range in the company's history.

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2000 - Ford buys Land Rover. The brand then beomes closely linked with Jaguar, with some
models sharing components and production facilities.

2008 - Ford sells Jaguar Land Rover to Tata Motors, India's biggest vehicle maker, for $2.3bn
(1.5bn), after almost ten months of negotiations. It never made a profit from Jaguar.
2009 - As car sales tumbled around the world, Jaguar Land Rover was forced to seek state loan
guarantees from then Business Secretary Lord Mandelson. It later walked away from
negotiations after the Government demanded control over the company's strategy.

2010 - In the final quarter of 2010, sales of Jaguar Land Rover cars rise 11pc to 63,155, with
particularly strong performances in North America, Russia, and China. Company drives towards
a 1bn annual profit.

2011 - Jaguar Land Rover announced that it would be hiring an additional 1,500 staff at its
Halewood plant, and signed over 2 billion of supply contracts with UK-based companies, to
enable production of its new Range Rover Evoque model.

2011 - The company confirmed that it would be investing 355 million in the construction of a
new engine plant at the i54 business park near Wolverhampton, central England, to manufacture
a family of four-cylinder petrol and diesel engines. In November 2011 Jaguar Land Rover
announced that it would be creating 1,000 new jobs at its Solihull plant, a 25 per cent increase in
the size of the workforce at the site.

2012 - Jaguar Land Rover announced the creation of 1,000 new jobs at its Halewood plant, and a
shift to 24-hour production at the plant. In the same month, Jaguar Land Rover and the Chinabased carmaker Chery agreed to invest an initial US$2.78 billion in a new joint venture the
activities of which will include the manufacture of Jaguar and Land Rover vehicles and engines,
the establishment of a research and development facility, the creation of a new automobile
marque, and sales of vehicles produced by the company. Jaguar Land Rover plans to create 4,500
manufacturing and engineering jobs in the UK over the next five years.

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2013 - Jaguar Land Rover announced an additional 1,700 jobs and 1.5 billion investment at its
facility in Solihull. The money will be spent on designing systems to allow the chassis of future
models to be made out of aluminium. The first of these models will be a new mid-sized sports
saloon car to be introduced in 2015.

2013 - Jaguar Land Rover announced plans to establish a new research and development center
in the UK. The National Automotive Innovation Campus will be based at the University of
Warwick. Jaguar Land Rover will invest 50 million in the facility with additional funding from
Tata Motors, the University and the UK government.

2014 - The Wall Street Journal reported that Jaguar Land Rover, sold a record 425,006 vehicles
in 2013 as demand for its luxury vehicles increased in all major markets including in China,
North America and Europe.

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THE LAND ROVER STORY


The original 1948 Land Rover was ingeniously designed and engineered for extreme capability
and strength. With extremely robust construction and characteristics such as short front and rear
overhangs, it drove off the production line ready to take on some of the worlds toughest terrain.
Today these qualities are as significant a part of what makes a Land Rover vehicle unique as they
were 60 years ago.

The Land Rover was the product of continuous evolution and refinement throughout the 1950s
and 1960s with improved stability and a tighter turning circle. It was a period in which Land
Rover took the lead in the emerging market for four-wheel drive vehicles. As a tough, reliable
mobility platform, countless organisations came to depend on Land Rover vehicles to get
personnel and equipment into the most challenging situationsand then safely out again. From
organisations such as Born Free Foundation to The Royal Geographical Society and Biosphere
Expeditions - we enter the second decade of the 21st century with them still relying on Land
Rover.

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Heritage

In keeping with the forward-thinking philosophy that founded Land Rover, a radical, entirely
new product was introduced in 1970 and created its very own vehicle category. This overnight
sensation was the original Range Rover. It had all the capability of a Land Rover with the
comfort and performance of an on-road car.

This culture of innovation has developed ever since with both Land Rover and Range Rover
vehicles: new models, more refinement, more innovative technology, more efficiency and fewer
emissions. And it continues with initiatives such as e_Terrain Technologies (which improves the
environmental performance of vehicles by reducing CO2 emissions), Sustainable Manufacturing
and CO2 Offsetting. Land Rover will remain at the forefront of advanced design the new small
Range Rover is a testament to the vision that takes the company forward and keeps it at the
cutting edge of technology and engineering.

KEY ISSUES
Ford acquired Jaguar for $2.5 billion in 1989.
Ford acquired Land Rover for $2.75 billion in 2000.
But the US auto major put the two marquees on the market in 2007 after posting losses of
$12.6 billion in 2006 - the heaviest in its 103-year history.

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WHY IS FORD SELLING

Reports said that losses at Jaguar stood at USD 715 million.

Jaguar was not performing well as it was unable to provide any profit for Ford due to
high manufacturing costs in United Kingdom

The wellbeing of Land Rover's profit, on the other hand, was boost up by the record sale
of 226,000 vehicles, an 18% year over year growth in 2007

"Bringing down production costs and turning around the company successfully will be
the challenge, analysts said

That Ford failed to reduce production costs as major proportion of cost is material cost
and they unable to bought cheaper materials from suppliers

This however is very different if Tata Motor takes the ownership because they are
utilizing countrys vast natural resources. The rationale to acquire JLR

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Ford close to announcing sale of Jaguar and Land Rover

Ford Motor Co., eager to raise cash starting a difficult 2008, is in final discussions with one
bidder, the Indian conglomerate Tata Group, to sell its Jaguar and Land Rover brands and a sale
is expected to be completed soon.

Tata has 98 companies in a variety of industries and has been rumoured to be the front-runner for
some time.

There is still a considerable amount of work to do and, while no final decision has been made,
we will proceed with further substantive discussions with Tata Motors over the forthcoming
weeks with a view to securing an agreement that is in the best interests of all parties concerned,"
Lewis Booth, executive vice president of Ford of Europe and the Premier Automotive Group,
said in a statement.

The Premier Automotive Group, created in 1999 to serve as the automaker's luxury vehicle
division, would essentially be dissolved by a sale of the two legendary luxury brands.
Former Ford Chief Executive Officer Jacques Nasser, who was one of the bidders for Jaguar and
Land Rover as head of One Equity Partners, assembled most of PAG during his reign from 1999
to 2001.

At one time, Ford's Premier Automotive Group controlled Aston Martin, Jaguar, Land Rover and
Volvo. Lincoln was also part of the division for a brief time, before Dearborn reclaimed control
of it in 2002, amid concerns of neglect.

But Ford sold Aston Martin in March 2007 for 430 million, and it was clear Jaguar and Land
Rover would be sold together as Ford decided to raise cash to save its ailing North American
business.

Both Jaguar and Land Rover are based in Britain and they share management, engineering,
manufacturing and distribution resources. .
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Volvo is the only non US brand in the group now retained by Ford, and it is widely expected that
Ford will work to further integrate with the company. For example, the new Taurus relied
substantially on engineering work done by the Volvo team.

While some analysts have speculated Jaguar and Land Rover could fetch as much as 4 billion in
a sale, other estimates, from Merrill Lynch & Co., are more conservative for the combined sale,
from 0.7 billion to 0.8 billion.
That would be substantially less than Ford paid for the two brands, which were acquired during
more financially healthy times. Ford bought Jaguar for 1.3 billion in 1989 and Land Rover for
1.4 billion in 2000.

But Ford has made it clear that it would shed noncore assets in an effort to raise cash as it tries to
restore profits to its troubled North American operations by 2009. That money-losing division
for the United States, Canada and Mexico, caused Ford to post a record loss of .6 billion in 2006.

Ford's so-called Way Forward turnaround plan calls for closing 10 plants, eliminating more than
40,000 jobs and revamping the company's line-up of Ford, Mercury and Lincoln products.

Tata Motors has proven excellence over the years through continuous strong financial results,
market expansion, acquisition, joint ventures and improvement and introduction of new products,
it seems to have a promising future. But it failed the expectation as the company was in trouble
right after the acquisition of Jaguar and Land Rover (JLR) in June 2008 due to the arrival of
global financial crisis. The bridge loan of US$ 3 billion which used to fund the acquisition of
JLR was due on June 2009 and yet at the end of the year 2008, Tata was only able to repay the
US$ 1billion. The declining revenues and a tight credit conditions was hurting the companys
cash flow.

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THE REASON BEHIND DECISION TO ACQUIRE

Long term strategic commitment to automotive sector.


Opportunity to participate in two fast growing auto segments (premium and small cars)
and to build a comprehensive product portfolio with a global footprint immediately.
Increased business diversity across markets and product segments.
Unique opportunity to move into premium segment with access to world class iconic
brands
Land Rover provides a natural fit above TMLs Utility Vehicles/SUV/Crossover
offerings for the 4x4 premium category
Jaguar offers a range of Performance/Luxury vehicles to broaden the brand portfolio
Sharing of best practises between Jaguar, Land Rover and Tata Motors in the future
Long-term benefits from component sourcing, low cost engineering and design services.

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THE DEAL PROCESS

12/06/2007- Announcement from Ford that it plans to sell Land Rover and Jaguar.

August 2007 - Major bidders are identified

Likely buyers: Tata Motors, M&M, Ceribrus capital Management, TPG Capital, Apollo
Management

India's Tata Motors and M&M arrived as top bidders ($ 2.05b & $ 1.9b)

03/01/2008 Ford announces Tatas as the preferred bidders

Tata motors raised a bridge loan of US $ 3 billion through syndicate of banks.

Additional amount of US $ 0.7 billion was for engine and component supply,
contingencies and working capital.

The amount was repaid in following manner

Rs 1.92 billion Underwriting agreement with JM financial consultants

Rs 1.75 billion was raised through a deposit scheme from the public

Additional subscriptions by promoter companies- Tata sons, Tata capital and Tata
Investment Ltd.

1 billion aid package by British Government .( out of total 2.3 billion )

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Jaguar and Land Rover are now officially Indian-owned. The sale of the two iconic British
brands was completed today, and ownership has now passed from Ford to Tata in exchange for
$2.3bn in cash (1.17bn). The sale means Jag/LR is debt-free, with none of the money used to
fund the purchase being offset against the pairs worth.
The sale gives Tata the ownership of Jaguar and Land Rover, all the necessary intellectual
property rights, the manufacturing plants, two design centres and the sales chain. Agreements
have also been signed for long-term use of Ford engines and future co-operation on hybrids and
other powertrain developments. Ford has also coughed up around $600m for Jag/LRs pension
coffers.
The official handover ceremony took place at Gaydon, with Ratan Tata and new Jag/LR CEO
David Smith present. David Smith had been acting CEO of the company since Geoff Polites
passed away in April 2008.
Smith leaves his full time position as Jag/LRs chief financial officer. At today's ceremony, he
said: We are very pleased with the association with Tata Motors. We look forward to a
sustained bright future for the company and its stakeholders.

THE REAL PICTURE:

Consumer demand plummeted

Credit lines were frozen

Automotive sector in India suffered contraction in demand

Launch of Nano delayed

Tata Motors reeling under a huge debt burden

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PROBLEMS IN THE DOMESTIC MARKET:

The profits for the first quarter for the year 2008-09 were at 3.26 billion

Q3 the sales of passenger vehicles went down to 41,287 units a drop of 14.14%

Tata Motors cut production across different categories

ANALYSIS:

Long term strategic commitment to automotive sector.

Opportunity to participate in two fast growing auto segments- Luxury cars and all terrain
vehicles.

Enhanced human capital and managerial talent.

Improvement in global market position through a combination of resources and strengths.

Sharing of best practices in manufacturing and quality assurance systems and processes

Benefits from component sourcing, design services and low cost engineering

COMPETITIVE ADVANTAGE:
Tata Motors is vulnerable to greater competition at home. Foreign vehicle makers
including Daimler, Nissan Motor, Volvo and MAN AG have struck local alliances for a
bigger presence.
Tata Motors, which has a joint venture with Fiat for cars, engines and transmissions in
India, is also facing heat from top car maker Maruti Suzuki India Ltd, Hyundai Motor,
Renault and Volkswagen

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VALUATION OF DEAL:
A] Cost synergies:

1] Material costs and not manpower key to better margins.


Purchasing basket offers bigger opportunity for cost reduction
It is more important to manage the material & sourcing costs to improve margins
Material Cost is 4-6x the wage cost for high-end products such as Land Rover.

2] Tata Group has multiple levers


Tata Auto Comp (TACO) - TATA group has a a rich ecosystem of JVs with leading
players in Auto ancillary space held through TACO.
TCS, Corus and Incat have varied competencies in the Auto space

B] Revenue synergies - A long-term possibility:

In the long-run Tata Group and Tata Motors footprint in South-East Asia should help
Jaguar/Land Rover diversify their geographic dependence from US (30% of volumes) and
Western Europe (55% of volumes)

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POST MERGER:

Following Cost Rationalisation initiatives were taken to improve cash flows:


1. Single shifts and down time at all three UK assembly plants.

2. Supplier payment terms extended from 45 to 60 days in line with industry standard.

3. Receivables reduced by 133 million from 38 to 27 days.

4. Inventory reduced by 217m between June 2008 and March 2009 from 70 to 50 days
5. Labour actions
-

Voluntary retirement to 600 employees.

Agency staff reduced by 800.

-Offered leaves to 300 workers of Bromwhich and Solihull plant.

-Additional 450 job cuts including 300 managers.

6. Agreement with Unions to implement pay freeze and longer working hours (equivalent to
approximately 20% reduction in labour costs.)

7. Engineering and capital spending efficiencies.

8. Fixed marketing and selling costs reduced in line with sales volume.
9. Reduction in all other non-personnel related overhead costs.

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PROBLEMS:

Drop in share prices

Failure of rights issue

Huge debt burden

Sales volume decreased by 35.2%

Lack of consumer loans

Issue of timing

Operational freedom slows pace of change

Depressed state of the global premium car market

Jaguar/Land Rover lost 306 million pounds ($504 million) for the fiscal year ending
March 2009

Tata Motors reported a net loss of Rs3.29bn ($67 million) for the quarter to end-June

Tatas core commercial vehicles market in India is also suffering from slower sales

Extremely high manufacturing costs in Britain

Eliminated more than 2,200 jobs

BENEFITS:

Tata wanted to make a global impact and it thinks that buying these brands at a lower rate
now, will give better value later on.

This acquisition also eases the entry of Tata in European market which it has been eyeing
for long. A previous JV with FIAT took place, this will further help them penetrate EU
market

Reduce the company dependence on the Indian market which accounted for 90% of its
sales

Increase sales in emerging markets


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Reduce dependence on mature markets

Opportunity to spread its business across different customer segment.

At the price staring from 63 lakh and going upto 93 lakh, it seems Tata has just got the
right place to compete with the current market leaders BMW, Audi, Mercedes.

Publicity on an international scale

Access to large distribution network

JLR had many new models lined up for next 3 years, so no much work just profits

Strong R & D culture and facilities

Component sourcing, engineering and design benefits

JLR had many new models lined up for next 3 years, so no much work just profits

Strong R & D culture and facilities

Component sourcing, engineering and design benefits

Page 36

FUND RAISING

Ordinary Equity Shares


Full Voting Right(2200 Crore)

A-Class Equity Shares


1 Vote for every 10 A-Class Equity Shares(2000 Crore)

This is the first time a major Indian Co. is raising money by issuing shares with
differential voting rights
5 Year 0.5% Convertible Preference Shares
Optionally convertible into A equity shares after 3years but before 5years from the date
of allotment(3000 Crore)

Indias largest automaker Tata Motors is on a fundraising spree as it faces increased capital
expenditure for expanding its product development pipeline.

The Mumbai-based company is expected to raise an additional Rs 300 crore through the sale of
bonds carrying a 9.35% coupon rate that is expected to hit the market shortly.

Apart from capital expenditure, the funds are will be also used for general corporate purposes, a
Tata Motors spokesperson confirmed.

The latest fundraising will push up its total fundraising activity to Rs 13,700 crore so far this
year.

Page 37

Just over a week ago, Tata Motors successfully raised $750 million (about Rs 4,600 crore) in its
second fund raising activity this year, for which it got $4.2 billion in orders for issue of senior
unsecured notes.

This was followed by the issue of senior notes of $500 million (Rs 3,000 crore) by its two UKbased luxury brands Jaguar Land Rover. The issue was done to fund JLR's ongoing growth and
capital spending plans.

In May this year, the company's wholly owned-subsidiary TML Holdings raised $300 million
(about Rs 1,800 crore) through an issue of fixed-interest debt securities. Last year, TML
Holdings, which also owns Jaguar and Land Rover, raised S$350 million through senior fixed
notes.

Earlier in January this year JLR issued bonds to raise GBP 400 million (Rs 4,000 crore), due in
2022.

Tata Motors intends to use a bulk of the October bond sales proceeds to refinance existing
external commercial borrowing (ECB) debt and to meet capital expenditure plans and
investment.
The company will spend about Rs 3,500 crore Rs 4,000 crore on capex at a standalone level
this year, up from Rs 3,094 crore last year on capex, design and development of products.

With the recent launch of its compact sedan Zest, the company is gearing up to launch its next
offering the Bolt hatchback based on the same vehicle architecture in the final quarter of this
financial year. Also in the works is a new compact sports utility vehicle, a more powerful Nano,
a refreshed Safari Storme, besides several upgrades in its commercial vehicle range.

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SWOT ANALYSIS

Strength:
Tatas strong management capability
Strong monetary base to invest

Weaknesses:
Jaguars declining sales record
Inexperience of handling such luxury brands

Opportunities:
Support from Ford in terms of Technology,Engine, IT, Accounting
Adding up of luxury brands in the product line
Access to European Market

Threats
Market is volatile and driven by new products
Strong presence of competitors like Mercedes, BMW, Lexus and Infinity

Recommendations:
Keep acquisition structurally separate
Maintain its identity
Hunt for synergies in selected areas
o Procurement synergies
Prevent their own antecedents from clouding established brands
Share operational Know-how
Operational Autonomy

Page 39

BUSINESS TRANSFORMED OVER LAST FIVE YEARS

JAGUAR:

Cessation of vehicle assembly operations at Browns Lane

Halewood shared with Land Rover

Workforce rationalisation (c.1,900 employees 2004-2007)

Working capital actions (stock reductions dealer and company)

Back-office integration with Land Rover SG&A efficiencies

Residual value management

Engineering efficiencies

Material cost reductions

Launched new range of diesel engines

Refocused marketing and communications around Beautiful Fast Cars

Launch of XK & XF and more in pipeline

Significant improvement in underlying results, net revenues and cost structure

Jaguar sales for the month were 4,794, higher by 5%,

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LAND ROVER:

Improved efficiency and quality at Solihull

Workforce rationalization (c.2,200 employees 2004-2007 )

Working capital actions (stock reductions dealer and company)

Engineering efficiencies

Material cost reductions

Adoption of Jaguar petrol engines and new range of diesel engines with Jaguar

Launch of new Discovery, Range Rover Sport and new Freelander.

Growth in new markets Russia, China

Quality improvement actions

Profitable for the last three years

Land Rover sales were 16,340, higher by 45%

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CONCLUSION
Indias GDP growth continued to be below 5% and Industrial growth remained in negative
territory. Consequently, the Indian auto industry witnessed a decline in both passenger vehicles
and in commercial vehicles segment by 4.7% and 22.4% respectively. For most of last year, the
economy was hamstrung by rising ination and high interest rates, leading to relatively low
consumer interest in buying new vehicles, and, in many cases, postponement of purchase. In the
later part of the year, reduction in excise duty and partial lifting of mining bans did help in
recovery of sentiment, but only to a limited extent. High delinquencies in vehicle nancing led to
tightening of lending norms by nanciers, which badly impacted the sales of small commercial
vehicles and passenger cars. Tata Motors domestic business, in this tough environment, lost
market share in both commercial vehicles and passenger vehicles business. While the
competition in both the segments remained quite aggressive with almost all the players resorting
to huge discounting, Tata Motors approach was cautious and responsible. As integral part of this
approach, the Company focused on keeping inventory levels low in order to reduce the burden
on its channel partners. On the product front, the company showcased several impressive new
products at the Auto Expo 14, with a lineup that included Tata Bolt and Tata Zest, due to be
launched in the coming months. Both the products have created high levels of excitement among
the potential customers. The new Prima LX and Ultra range in commercial vehicles also
showcased great promise to be category leaders. They aptly demonstrate Tata Motors
technological capabilities and the companys pursuit to oer world-class products and
experience to its customers. To ensure long-term competitiveness of Tata Motors, the company
also took several steps under the Horizo next strategy- new products, quality improvement and
enhancement of the consumer experience- that will help improve sustainable protability of the
business in long-term. The company has steadily progressed in all these areas and is inculcating a
culture which is intolerant to poor quality and absolutely committed to customer delight.

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BIBLIOGRAPHY

http://www.jaguar.in/
http://www.landrover.in/
http://www.tatamotors.com/investors

Tata Motors Annual Report 2013-14

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