Business Today

JLR Woes for Tata

When Ratan Tata picked up Jaguar and Land Rover from Ford, he was on an acquisition spree.
twitter-logo Prosenjit Datta   New Delhi     Print Edition: September 9, 2018
JLR Woes for Tata

Jaguar and Land Rover started life as independent ventures, both born in the UK a few years apart. In the early 1900s, the S S Company made a number of cars that were branded Jaguar. In 1945, the company renamed itself Jaguar Cars. It quickly became known for building sporty and beautifully designed cars. Land Rover was born as a part of the Rover group in either 1947 or 1948. It developed the reputation for building some of the toughest off-road vehicles - maybe even better than the legendary Jeep that was considered its inspiration initially. Land Rovers entered the luxury SUV segment much later through the Range Rover label.

Both cars made names for themselves but neither were financial successes. Jaguar and Land Rover became part of the Leyland group in the 1960s, existing as separate operations. (Leyland also had Triumph Motors in its stable.) Leyland was not a profitable company. British Leyland was nationalised in 1978 to rescue it from financial distress. Jaguar was later spun out and listed as an independent company. But again, it failed to survive as one for very long. It also picked up the reputation for making cars that were brilliant but temperamental. In 1990, it was sold to the Ford Motor Company.

Meanwhile, the Rover brand became part of BMW. In 2006, Ford bought the Rover brand name from the German luxury automaker. However, Ford could not make the two British brands a commercial success either, and sold them to the Tata group in 2008. Ratan Tata used Tata Motors as the vehicle for picking up Jaguar and Land Rover, and then created a holding company Jaguar Land Rover to house the two brands. JLR, though a subsidiary of Tata Motors, operated largely as an independent company with its headquarters and main manufacturing in the UK.

When Ratan Tata picked up Jaguar and Land Rover from Ford, he was on an acquisition spree. He had also picked up Tetley, Corus and several other global companies in early to mid-2000s. Of these acquisitions, many pundits felt that Jaguar and Land Rover was a big mistake. Neither brand had made any money despite numerous changes in ownership. Their reputation was also tarnished and neither was seen as a serious player in the luxury-end of the market dominated by the German trio - Mercedes, BMW and Audi.

As it turned out, while Corus (Tata Steel UK) gave the Tatas endless trouble, JLR quickly turned around and became a proper rival for the other luxury brands. It also started generating lots of cash for the Tata group itself - at one point, three years ago, JLR contributed to 56 per cent of the Tata group profits. (Tata Steel UK was haemorrhaging cash, and most other companies in the group did not make big profits.) In the last four years, while Tata Motors' Indian operation was making losses, JLR ensured that the overall Tata Motors balance sheet was in the black.

But JLR has been slowly sliding into trouble. It was overdependent on the China market and it was also hit by the Brexit preparations. It reported a big loss this first quarter, though it is hoping to make profits by the year-end.

The importance of JLR to the Tata group cannot be understated. Senior Associate Editor Sumant Banerji looks at how the problems cropped up and whether it can turn around quickly in our cover story this issue.

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