The Hindu Business Line : Jaguar Land Rover drags Tata Motors into the red

Meltdown blues: Mr Ravi Kant (left), Vice-Chairman, and Mr P.M. Telang, Managing Director - India Operations, Tata Motors, at a press conference to announce the company’s results on Friday.

Our Bureau

Mumbai, June 26 The acquisition of the UK-based Jaguar Land Rover (JLR) has cost Tata Motors dearly, with the company posting a net loss of Rs 2,505 crore for 2008-09 on a consolidated basis. It had bought the company from Ford for $2.5 billion in June last year. The Jaguar Land Rover business reported a loss of Rs 1,777 crore.

Tata Motors has, however, reported a standalone net profit of Rs 1,001 crore for the fiscal, a fall of 51 per cent. Consolidated revenue almost doubled to Rs 70,939 crore from Rs 35,660 crore.

Meltdown impact

According to Mr Ravi Kant, Vice-Chairman, the global economic meltdown impacted JLR sales as major auto markets shrank considerably. The combined annual sales of JLR fell 32 per cent to 1.67 lakh units since the Tata acquisition. While Land Rover numbers fell to 1.2 lakh units from 1.98 lakh units, Jaguar sold 1,000 cars fewer than last year at 47,000 units.

On the outlook for JLR, Mr Kant said, “Things have begun to improve in countries like China. Sales of premium products in the US have been improving for the last 2-3 months but it is too early to say.” JLR sales fell 37 per cent last fiscal in North America and 31 per cent in the UK.

Tata Motors is still in talks with the UK Government on the guarantee for the £340-million loan approved by the European Investment Bank. It is this impasse that is causing some anxiety.

Although Mr Kant expressed “cautious optimism” on revival of sales, he did not rule out tough measures to keep business steady.

Tough measures

“There will be further job cuts and plant shutdowns if required. We have laid off 2,000 people, sent a few on sabbatical, adopted low cost country sourcing and are keeping tight control of cash flow,” he said.

Mr C. Ramakrishnan, Chief Financial Officer, said, “We have rationalised the JLR workforce to 16,000 from 27,000. Inventory levels have come down from 70 days to 50 days while engineering and capital spend is £400 million on an average.”

Incidentally, one-fourth of JLR’s raw material sourcing is from such low cost countries and this will increase in the coming years as the company endeavours to keep costs in check. It would also be interesting to see if India plays a critical role in this effort as it has a sound supplier base which is already in a host of global programmes.

The JLR setback has not deterred Tata Motors from bringing the vehicles to India. A new showroom is already up in Mumbai and the models planned are the XF and Range Rover. A formal unveiling is scheduled on Sunday.

Tata Motors’ other global arm, Tata Daewoo Commercial Vehicles of South Korea, registered a 23 per cent fall in sales at 9,137 units last fiscal while profits were down 30 per cent to Rs 111 crore. The company’s total revenue for the year was Rs 2,500 crore. The constructions solutions company, Telcon’s profit dropped 86 per cent to Rs 45 crore.

The share price of Tata Motors was marginally up at Rs 340.30 on BSE on Friday.

Related Stories:
Tata Motors aims to sell 4,000 World Trucks this fiscal
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Jaguar Land Rover: As much Britain’s problem as Tatas’

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