(Updates with comment from chairman in sixth paragraph.)
Sept. 12 (Bloomberg) -- Tata Motors Ltd., owner of the Jaguar and Land Rover brands, is being forced to search for a new chief executive officer as it struggles to revive sales of luxury cars amid a worsening debt crisis in Europe.
Carl-Peter Forster, 57, who helped the Jaguar Land Rover unit turn to profit in the year ended March 31, quit on Sept. 9 after less than two years as the global head of India’s biggest automaker citing “unavoidable personal circumstances.”
Forster’s replacement will face the challenge of reversing six straight months of declining sales at Jaguar as economies in Europe stall. Tata Motors, which last year got 35 percent of its revenue from the U.S. and Europe, needs to find a head for the company soon to avoid derailing a plan to invest $2.4 billion annually in new models and expanding into China, according to Deepesh Rathore, managing director for IHS Automotive.
“They are going to be left wondering who is going to replace him,” said Andrew Jackson, an analyst at research firm Datamonitor in London. “This is a big blow really for Jaguar Land Rover. He signed off on a very bold change in direction for the company.”
Tata Motors’ shares declined 4.3 percent, the most since Aug. 19, to 146.35 rupees at the 3:30 p.m. close in Mumbai. The company’s shares have dropped 44 percent this year, making it the worst performing stock in the BSE India Sensitive Index.
Credit to Management
“The credit for the turnaround of Jaguar Land Rover goes to the management team and workforce of the company,” Ratan Tata, chairman of Tata Motors, said in an e-mailed statement today. “No single person can or should take credit for the improvement in the company’s operations.”
Prakash Telang, managing director of the company’s Indian operations, and Ralf Speth, chief executive officer of Jaguar Land Rover, will represent their respective units on Tata Motors’ board, according to an e-mailed statement on Sept. 9.
Forster presided over a 20-fold jump in Jaguar Land Rover’s profit before tax in the year ended March 31. He also led Tata Motors plan to tap China, Asia’s largest economy.
China is the No. 1 growth market for Jaguar Land Rover, Forster said in a Bloomberg TV interview in May. Tata Motors is looking for a local partner in China to set up assembly operations in the country, and the company has shortlisted manufacturers, Forster said in a separate interview the same month, without naming any of the potential partners.
‘Difficult to Replace’
Forster helped by “pulling Jaguar and Land Rover out of the mud and making them profitable,” said Peter Schmidt, managing director of Warwick, England-based Automotive Industry Data. “It will be very, very difficult to replace him in the short term, and possibly in the long term.”
The Jaguar Land Rover unit, based in Gaydon, England, generated 57 percent of Tata Motors’ revenue for the year ended March 31, up from 53 percent a year earlier.
The division’s pretax profit surged 20-fold to 1.12 billion pounds for the fiscal year. Jaguar aims to challenge Bayerische Motoren Werke AG with a hybrid supercar and an entry-level sedan to compete with the 3-Series.
The new models are part of Tata’s plans to invest 1.5 billion pounds ($2.4 billion) annually in product development at Jaguar and Land Rover over the next five years. The spending will include 40 new vehicles or upgrades, including the Range Rover Evoque, for which the company has begun deliveries.
Jaguar will unveil its C-X16 concept car at the Frankfurt Motor Show tomorrow, according to the company’s website. The 186 miles (299 kilometers) per hour two-seater sports car is the company’s smallest car in more than fifty years. Land Rover also intends to introduce a new Defender model in 2015 and will show the Land Rover DC100, its concept for a potential successor.
Europe’s debt crisis drove a 23 percent decline in Jaguar sales to 4,372 in July, according to a company statement. Almost 25 percent of Jaguar and Land Rover sales come from the U.K., where the economy grew at the slowest pace in the second quarter since it contracted in the first three months of 2010. North America and Europe account for about 22 percent each of sales, according to a company presentation.
Forster, who was hired in February 2010, will remain as a non-executive member on the company’s board, Mumbai-based Tata Motors said in the statement. The company recruited Forster from General Motors Co. where he was head of European operations.
Passenger-vehicle sales at Tata Motors slumped 33 percent in August from a year earlier after India’s central bank raised its benchmark interest rate to 8 percent in July, the highest among Asia’s biggest economies.
Deliveries of the Nano, the world’s cheapest car, plunged 85 percent to 1,202 units in August, Tata Motors said in a statement on Sept. 1. The Society of Indian Automobile Manufacturers said last week it may cut the industry’s sales forecast after economic growth slowed to the lowest in six quarters in the three months ended June.
“I would expect Forster’s position to be filled up in the next two to three months if the company wants to keep their plans on track,” said Rathore.
Tata Motors bought Jaguar Land Rover from Ford Motor Co. in 2008 for $2.5 billion.
--Editors: Arijit Ghosh, Subramaniam Sharma
To contact the reporters on this story: Siddharth Philip in Mumbai at email@example.com; Steven Rothwell in London at firstname.lastname@example.org
To contact the editor responsible for this story: Kae Inoue at email@example.com