The Story of Jaguar Land Rover

The story of Jaguar Land Rover turnaround is quite a remarkable one given the short time frame in which the company returned to profits. Tata Motors succeeded where MNC's like BMW and Ford motors failed. Initially critics had doubted Tata's ability to manage such a premium and iconic brand, fearing that the Indian ownership will hurt the premium tag of the company. People couldn't understand how a commercial and small car manufacturer will turn around the fortunes of premium marquee brands like Jaguar and Land Rover. Hence, the story is also of importance to the India growth story as it highlights how strong the management abilities of Indian companies are.

The June 2008, $2.5 billion acquisition couldn't have come at a worse time for JLR and TATA Motors as the mortgage market in US collapsed leading to a global slump. Those who had money didn't want to lend it to anyone. TATA Motors found itself saddled with a debt of around Rs. 21,900 cores, a tricky proposition for a company which had been relatively debt free. Unemployment and credit crisis meant lower sales in the critical markets of US and Europe. JLR needed a lot of cash but the recession made things worse for them. So bad was the situation that JLR even tried to approach the UK government for a probable bailout. At the height of the crises TATA Motors shares dropped to a low of Rs. 126.45 valuing the company at $ 1.5 Billion, fraction of what it paid Ford to acquire JLR

In FY2009 TATA Motors reported its first annual loss in the last seven years. It recorded a loss of Rs. 2,500 crores compared to a profit of Rs. 2,200 crores in 2008. The JLR unit made a pre-tax loss of Rs. 1,800 crores on the back of poor demand in crisis hit US and Europe.

Two years down the line those hard days seem very distant. JLR has been generating profits for several recent quarters. It now contributes to over 50% of the revenue of TATA group. The new launches have worked very well. Sales in China have surged contributing to the growth in revenue. Sales in US and Europe have also seen a healthy rise. Tata Motors current market capitalization is approx $13.87 billion(as per closing value of stock on 23.01.2012)

The Acquisition

It was first in 2007 that Mr. Ratan Tata and Mr. Ravi Kant (CEO TATA Motors) were given a brief about JLR by Ford. Mr. TATA asked his senior employees whether this acquisition would make sense. To decide on the acquisition Mr. Tata and Mr. Kant set off for US and UK to check whether these two brands still held sway in the market. In US they met dealers, who had been having hard time since long. However, these dealers expressed their faith in the brand to Mr. Tata. Next came the dealers in UK, they too held a similar view of the brand. This reassured TATA Motors that the brand of Jaguar and Land Rover was still strong in the market. Once assured of the brands power