Q&A: David Smith, CEO, Jaguar Land Rover
S Kalyana Ramanathan / New Delhi July 11, 2009,
David Smith, 48, the big boss at British car maker Jaguar Land Rover (now owned by Tata Motors), says he has a strategy to make the financial bleeding stop and return to profitability soon. With just over a year as CEO of JLR, Smith has his hands full, with the unions on one side and the urgency to trim costs and return to profitability on the other. His biggest challenge, however, is outside his own control — the global economic recession that is keeping luxury car buyers away from his dealerships. Excerpts of an interview with S Kalyana Ramanathan:
The Euro 340-million loan from the European Investment Bank is waiting for the UK government’s gurantee for over three months now. Are you running out of time?
We are all impatient. The loan was approved in April. What we need to do is make an agreement with the UK government around guarantees. We are still working through that negotiation, providing a lot of financial information. At the end of the day, we have to ensure the terms of the loan are commercial.
Is the UK government’s demand for a board berth in JLR holding back its gurantee for the EIB loan?
I think, we all believe that the government is not very good at running companies. Anything we agree with the government or in fact with any other lender should not interfere with our ability to run the company. Any agreement we do reach is commercial and gives us the ability to run the business properly.
That clearly rules out your willingness to give a board berth and provide only the assets to back the government’s gurantee.
Yes, that’s what I think a commercial loan implies. Its really about making sure the government has the right security, gets the right information and reporting, and it’s not about running the company.
Is the fact that JLR is now owned by a non-UK parent making negotiations with the banks or the UK government more difficult?
No, I don’t think that’s the case at all. It has more to do with the economic conditions and conditions of the banks itself. They are just being very cautious. In fact, a high proportion of UK companies, including listed companies, have foreign ownership. So, that isn’t an issue at all.
Given the constraint of time, are you also looking at an alternate source of funds?
We are. Naturally, we have been working with a number of commercial banks, both in India (Bank of Baroda) and UK. We already have some inquiries and that’s going well. And that’s more or less close to being done as well. We are not only trying to find money for the ongoing working capital requirements, but also for big investments in the future. We want to invest in green technologies, in new products, entering new markets, including the strategies to enter into India that we recently launched. There are a lot of exciting opportunities for the business.
Given the present pressure to contain costs, would Tata Group have a bigger role to play in JLR now? Have you finalised your parts’ sourcing plans from India?
We are already using some of the services from India, like IT and engineering. It’s too early to put a number to it now. We roughly source 20 per cent of our component requirements from outside the UK/Europe supply base. Most of this is from Eastern Europe now. We want to increase that to a third. That clearly is the opportunity. This is not just India, but India will have a natural advantage with a company (Tata Motors) that is familar with India. We already have some experience in sourcing components and engineering services from India. Those have been a good expereinces and will help us accelerate it.