Jaguar Starts Making Money for Tata Motors

Posted by: Bruce Einhorn on March 1, 2010

Tata’s 2008 acquisition of British luxury carmaker Jaguar Land Rover (JLR) always seemed to me like a vanity play. The symbolism was nice – Indian company buys high-profile symbol of the former colonial power – but JLR and its money-losing British operation seemed like an unnecessary burden for a company that should be focusing on the huge opportunities in its home market. The timing of the $2.5 billion deal was awful, too, coming just before the subprime meltdown hammered demand for high-priced luxury names like Jaguar.

Investors clearly haven’t been so concerned, though. Tata’s ADRs are up 422% in the past year – and that was when JLR was still losing money. Now the luxury division is finally starting to make profits for Tata thanks to cost cutting, a better product mix and a slowly improving global economy. A slew of analysts – including those at Morgan Stanley, Bank of America Merrill Lynch and Nomura – have come out with upbeat reports about the company following Tata Motors’ quarterly earnings announcement last week. Overall sales rose 47% to $5.65 billion and profits were $141 million, compared to a loss of $565 million a year earlier. JLR made a profit of 4.17 billion rupees ($90 million), compared to a loss of 11.8 billion rupees a year earlier. Looking at the results, Nomura described a “significant turnaround” at JLR and Morgan Stanley said JLR’s earnings “were significantly ahead of our estimates.” Morgan Stanley analyst Binay Singh added: “We believe the company is well placed to benefit from a volume recovery” in the luxury car market as well as the Indian market for commercial vehicles.

Tata recently hired Carl-Peter Forster, former head of GM Europe, as Group CEO and Ralf Speth, a BMW veteran, to be CEO for Jaguar Land Rover. “These appointments should strengthen overall management and speed up the recovery process,” Macquarie analyst Sanjay Doshi wrote in a March 1 report. I still have my doubts that buying JLR was the right deal for Tata, which trails far behind market leader Maruti Suzuki in its home market despite Tata’s much-hyped Nano, the world’s cheapest car. I would have thought the company needed to focus more on India. Still, the company announced today that February sales in India rose 56%, so things are heading in the right direction at home. With Forster and Speth on board, the new talent should help Tata keep the turnaround going overseas, too.

Reader Comments

mb

March 2, 2010 3:16 AM

I am happy its finally making a turn around. A plant closure was on the cards but i didn't think it would be one of the 2 midlands plants but be it Halewood but now it seems more sense to keep the trained elite at liverpool. I just hope it can keep it going and maintain the competitve edge against the rival germans for future investments in technology and employee skills. Jaguar it seems is least popular in the indian community here in the UK so i think Tata could do with a PR stunt using bollywood, put them to some use other than their cr@p acting ;)

Bob

March 3, 2010 7:14 AM

How the mighty have fallen! Tssk Tssk

Once upon a time the mujaheedeen Pakistanis used to critiize their so called "communist"pro Soviet Indian neighbors for their shoddy cars....and now an Indian transnational (Tata) has turned around a symbol of luxury capitalism -Jaguar.

And this is just the beginning..True power to the real movers and shakers on this planet.All of this is a sign you can't ignore Asia's billions which dwarf every other continent on this planet. Mighty billions and trillions keep them rolling!

nagaraj

March 3, 2010 8:43 AM

bruce, it is a clear sign that you should shut up and let indian companies do their business. They dont do things without any plan. Therefore, as a shareholder of tata, i feel that this is normal for any indian company since risk is associated with growth

Manan

March 7, 2010 4:08 AM

amazing news... Buildup confidence in other Indian enterpreneurs. Thanks to Tata Motors.

IA

March 7, 2010 11:23 PM

Vanity and symbolism, not so appropriate words to use when talking/thinking about Tata group. With more than 100 years of history behind them, and a presence in sectors ranging from salt to software, few groups(any where in the world) can match their breadth, depth and scale. Not only foreign general public, but authors were also unpleasantly surprised regarding Tata's performance since taking over Corus and JLR. Their country centric inward looking brains were not able to grasp Tata group's capabilities. That is why Tatas were written off from day one by all these authors. I hope the lesson is learnt now. If not they will make a fool of themselves again and again. Not that it is fun to watch that kind of spectacle again.

rhmayo

April 12, 2010 1:10 AM

BE is a India baiter and will write just to get your dander up. Better to ignore low lifes like him, yet better still posters should stop the nationalistic hosannas for minimal accomplishments

Greg D

August 10, 2010 10:17 AM

TATA have done exceptionally well and credit has to be given to the company for turning around the Jaguar luxury marque and iconic Land Rover vehicle's. I would recommend TATA as shares to buy for the long term.

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Bloomberg Businessweek’s team of Asia reporters brings you the latest insights on business, politics, technology and culture from some of the world’s biggest and fastest-growing economies.

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