Tata Motors' Acquisition of Jaguar and Land Rover
Case Code: BSTR313
Case Length: 18 Pages
Pub Date: 2009
Teaching Note: Available
Organization: Tata Motors, Jaguar, Land Rover, Ford Motors
Countries: India, UK, US
Themes: Globalization, Standardization, Localization, Cultural issues
Abstract Case Intro 1 Case Intro 2 Excerpts
Ford Sells JLR
In September 2006, after Allan Mulally (Mulally) assumed charge as the President and CEO of Ford, he decided to dismantle the PAG. In March 2007, Ford sold the Aston Martin sports car unit for US$ 931 million. In June 2007, Ford announced that it was considering selling JLR...
On March 26, 2008, Tata Motors entered into an agreement with Ford for the purchase of JLR. Tata Motors agreed to pay US$ 2.3 billion in cash for a 100% acquisition of the businesses of JLR. As part of the acquisition, Tata Motors did not inherit any of the debt liabilities of JLR - the acquisition was totally debt free...
Tata Motors was interested in acquiring JLR as it would reduce the company's dependence on the Indian market, which accounted for 90% of its sales. The company was of the view that the acquisition would provide it with the opportunity to spread its business across different geographies and across different customer segments....
Morgan Stanley reported that JLR's acquisition appeared negative for Tata Motors, as it had increased the earnings volatility, given the difficult economic conditions in the key markets of JLR including the US and Europe. Moreover, Tata Motors had to incur a huge capital expenditure as it planned to invest another US$ 1 billion in JLR. This was in addition to the US$ 2.3 billion it had spent on the acquisition. Tata Motors had also incurred huge capital expenditure on the development and launch of the small car Nano and on a joint venture with Fiat to manufacture some of the company's vehicles in India and Thailand. This, coupled with the downturn in the global automobile industry, was expected to impact the profitability of the company in the near future...
The Road Ahead
Tata Motors had formed an integration committee with senior executives from the JLR and Tata Motors, to set milestones and long-term goals for the acquired entities. One of the major problems for Tata Motors could be the slowing down of the European and US automobile markets. It was expected that the company would address this issue by concentrating on countries like Russia, China, India, and the Middle East...
Exhibit I: International Acquisitions by Tata Group
Exhibit II: Assets and Liabilities - Jaguar Land Rover
Exhibit III: Jaguar and Land Rover - Worldwide Sales
Exhibit IV: Jaguar Land Rover - Financial Performance
Exhibit V: Tata Motors - Stock Price Chart
Exhibit VI: Tata Motors - JLR Acquisition Structure
Exhibit VII: Jaguar and Land Rover New Products Pipeline
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