S Kalyana Ramanathan / London September 25, 2009
Promises mega investment in green vehicles, new models, jobs
Tata Motors-owned Jaguar Land Rover today unveiled what it called a new business plan for the next decade, under which it will invest substantially in a new range of eco-friendly vehicles.
The plan, designed to increase global competitiveness, drive growth and sustain profitability, envisages an investment of £800 million (over Rs 6,200 crore) on environmental innovation alone, part-supported by the European Investment Bank.
The plan will also see the company shutting one of its plants in the UK, but, it promises, without any job loss. Rather, it says, it is likely to add 800 more jobs by the middle of 2010.
A company spokesperson also said the new Range Rover production will start by 2011, the preparation for which will commence by the middle of next year. Apart from the new Range Rover, the company also proposes to develop a new light weight sedan, sports cars and sports utility vehicles and "electrification technology" (to produce hybrid cars).
Jaguar Land Rover Chief Executive Officer, David Smith said: "This is a plan that recognises the impact the economic collapse has had on our business, and at the same time the opportunities that lie ahead for these two great brands. We are confident that a new more efficient and competitive structure, combined with future investment, will unlock the true potential of this business."
The company said it plans to rationalise production between two of its plants in the West Midlands. The plan could result in the moving of production from one plant to another, leaving one of the plants redundant. At the moment, one produces Jaguars and the other makes Land Rovers.
However, workers are suspicious. GMB, a key union in the company's 14,500 strong work force, in its initial reaction to news of a possible plant closure said wants details “GMB will be opposing everything we have heard so far. We will fight the company on this – of that I have no doubt,” said Bert Hill, their regional officer.
"The car industry has been through an unprecedented recession. New car sales, including those of Jaguar and Land Rover, are down globally by 25-30 percent. This has resulted in manufacturing capacity utilisation of less than 60 percent at Jaguar Land Rover, which combined with the credit crunch, has exposed fundamental weaknesses in the structure of the business," a JLR statement said.
Over the past year, production in JLR was reduced by more than 1,00,000 units; spending and costs were cut; jobs reduced by 2,500; pay frozen and bonuses cancelled. "But this was not enough to offset the full magnitude of the downturn and the company swung from profit in 2007 to significant losses over the past 12 months. This was not a sustainable situation. Actions taken have started to reverse the trend, quarter over quarter, and we now have to take the company to the next level of competitiveness," the statement from JLR said.
Though no firm decision has been made, the company is also looking at potential local manufacturing in cost-competitive markets like India.
Showing posts with label David Smith. Show all posts
Showing posts with label David Smith. Show all posts
Thursday, September 24, 2009
Thursday, August 20, 2009
Can this man rescue JLR?
Profile of RAVI KANT, vice chairman, Tata Motors//Chairman Jaguar Land Rover
S Kalyana Ramanathan / August 17, 2009, 0:52 IST
It is a fad amongst successful executives to plan an early retirement so that they can go angling or write a book. Ravi Kant’s case is slightly different. He turned 65 a couple of months ago and stepped down from the post of managing director of Tata Motors — India’s largest automobile company — to become its non-executive vice-chairman. Still, he is unlikely to get the time to fish for trout in mountain streams or pen his memoirs. Kant has taken on what could possibly be the biggest challenge of his illustrious career — turning around Jaguar Land Rover. He has promised to turn around Tata Motors’ most-debated acquisition in about two years from now.
Given that JLR was profitable until the first half of 2008, it might seem a bit of a stretch to call its turnaround a daunting challenge. But then the time frame Kant has promised surely makes it harder than what it seems. JLR CEO David Smith, in a recent interview to
Business Standard, did not share Kant’s optimism. Smith’s doubts are not about JLR’s capabilities but have more to do with the state of the global economy. For the first time, after fifteen long months, the car industry in the United Kingdom posted growth in retail sales last month. But during this period, JLR sales continued to slip. One cannot look for a clearer sign that consumers are still not ready to splurge on luxury and premium cars.
JLR was not served to Tata Motors on a silver platter. The acquisition was sealed after nearly ten months of negotiation with Ford Motor Company. The price at $2.3 billion (Rs 11,000 crore in today’s value) was not cheap either. JLR insiders now tell that even though it was Tata Motors’ Chairman Ratan Tata’s vision to buy JLR, it was Kant who, from an executive standpoint (as the company’s managing director), chased it to the finishing line and brought home two of the world’s most luxurious automobile brands.
Kant had done similar work before. He played a key role in expanding Tata Motors’ global footprint — the acquisition of Daewoo Commercial Vehicles in South Korea and Spanish bus and coach body manufacturer Hispano Carrocera. Tata Motors executives say that Kant has his turnaround strategy ready which will begin to unfold in the next few months. Of course, they are unwilling to share details.
He has already made the right moves, though. In 2008, as Tata Motors moved closer to bagging JLR, one the earliest milestones the team from India achieved was to convince the unions in the UK that they meant business. Union leaders play a proactive and constructive role in the UK and, therefore, management takes them very seriously. Tata Motors used this to its advantage. Even before Ford’s board could decide to sell JLR to Tata, the unions backed the Indian group. Kant met with workers at all the four locations of JLR in the UK. He went one step further. A team of union leaders from the UK visited India and met with their counterparts in Tata Motors. Des Quinn, the lead negotiator for the unions, now recollects how the unions from the beginning were convinced JLR would be safe in Tata’s hands, something he couldn’t say about other suitors for JLR.
Kant’s rise in the Tata Group was swift. He came to Tata Motors in 2000 when he was 57. Starting as the head of commercial vehicles division of Tata Motors, he became the managing director in 2005 — around the same time that the Tata Nano had begun to take shape. Prior to this, his stint in the group was with Titan Industries. Apart from this, a good part of his career was spent with LML, Philips, Hawkins Cookers and Kinetic Engineering. Kant hit the limelight when he made LML a force in the scooter market which had for long been the monopoly of Bajaj Auto. He brought a new product line, spruced up the dealerships and revved up the advertising. Now, of course, the company has gone into oblivion.
History tells us that car makers around the world have had to toil for decades to put their luxury brands on the world map. Toyota’s Lexus, BMW and Daimler’s Mercedes have invested obscene amounts of money building quality, reliability and brand value. Tata Motors, which is one of the youngest car markers in the world today, took a short cut to this elite world of luxury cars. Now it is time to see if Kant can help it hold on to the marquee brands. Even a seasoned car maker like Ford could not hold on to these two mega-brands for long — it had bought Jaguar in 1989 and Land Rover in 2000. Kant has his task cut out.
S Kalyana Ramanathan / August 17, 2009, 0:52 IST
It is a fad amongst successful executives to plan an early retirement so that they can go angling or write a book. Ravi Kant’s case is slightly different. He turned 65 a couple of months ago and stepped down from the post of managing director of Tata Motors — India’s largest automobile company — to become its non-executive vice-chairman. Still, he is unlikely to get the time to fish for trout in mountain streams or pen his memoirs. Kant has taken on what could possibly be the biggest challenge of his illustrious career — turning around Jaguar Land Rover. He has promised to turn around Tata Motors’ most-debated acquisition in about two years from now.
Given that JLR was profitable until the first half of 2008, it might seem a bit of a stretch to call its turnaround a daunting challenge. But then the time frame Kant has promised surely makes it harder than what it seems. JLR CEO David Smith, in a recent interview to
Business Standard, did not share Kant’s optimism. Smith’s doubts are not about JLR’s capabilities but have more to do with the state of the global economy. For the first time, after fifteen long months, the car industry in the United Kingdom posted growth in retail sales last month. But during this period, JLR sales continued to slip. One cannot look for a clearer sign that consumers are still not ready to splurge on luxury and premium cars.
JLR was not served to Tata Motors on a silver platter. The acquisition was sealed after nearly ten months of negotiation with Ford Motor Company. The price at $2.3 billion (Rs 11,000 crore in today’s value) was not cheap either. JLR insiders now tell that even though it was Tata Motors’ Chairman Ratan Tata’s vision to buy JLR, it was Kant who, from an executive standpoint (as the company’s managing director), chased it to the finishing line and brought home two of the world’s most luxurious automobile brands.
Kant had done similar work before. He played a key role in expanding Tata Motors’ global footprint — the acquisition of Daewoo Commercial Vehicles in South Korea and Spanish bus and coach body manufacturer Hispano Carrocera. Tata Motors executives say that Kant has his turnaround strategy ready which will begin to unfold in the next few months. Of course, they are unwilling to share details.
He has already made the right moves, though. In 2008, as Tata Motors moved closer to bagging JLR, one the earliest milestones the team from India achieved was to convince the unions in the UK that they meant business. Union leaders play a proactive and constructive role in the UK and, therefore, management takes them very seriously. Tata Motors used this to its advantage. Even before Ford’s board could decide to sell JLR to Tata, the unions backed the Indian group. Kant met with workers at all the four locations of JLR in the UK. He went one step further. A team of union leaders from the UK visited India and met with their counterparts in Tata Motors. Des Quinn, the lead negotiator for the unions, now recollects how the unions from the beginning were convinced JLR would be safe in Tata’s hands, something he couldn’t say about other suitors for JLR.
Kant’s rise in the Tata Group was swift. He came to Tata Motors in 2000 when he was 57. Starting as the head of commercial vehicles division of Tata Motors, he became the managing director in 2005 — around the same time that the Tata Nano had begun to take shape. Prior to this, his stint in the group was with Titan Industries. Apart from this, a good part of his career was spent with LML, Philips, Hawkins Cookers and Kinetic Engineering. Kant hit the limelight when he made LML a force in the scooter market which had for long been the monopoly of Bajaj Auto. He brought a new product line, spruced up the dealerships and revved up the advertising. Now, of course, the company has gone into oblivion.
History tells us that car makers around the world have had to toil for decades to put their luxury brands on the world map. Toyota’s Lexus, BMW and Daimler’s Mercedes have invested obscene amounts of money building quality, reliability and brand value. Tata Motors, which is one of the youngest car markers in the world today, took a short cut to this elite world of luxury cars. Now it is time to see if Kant can help it hold on to the marquee brands. Even a seasoned car maker like Ford could not hold on to these two mega-brands for long — it had bought Jaguar in 1989 and Land Rover in 2000. Kant has his task cut out.
Wednesday, August 12, 2009
JLR gets funding without UK government aid
S Kalyana Ramanathan, London/August 12
Fraught four-month-long negotiation between Tata Motors-owned Jaguar Land Rover (JLR) and the UK government over a loan guarantee ended in an anti-climax today, with the Mumbai-headquartered automobile maker announcing that it has secured loans from commercial banks and would not need any support from the UK government.
Even though neither Tata Motors nor JLR specified how much it raised, it is understood that this could be in the vicinity of £175 million (Rs 1,400 crore).
Today's announcement comes a day after JLR said it had successfully secured a financing facility of up to £75 million (Rs 600 crore) for Land Rover's working capital needs from Burdale Financial Ltd, a member of the Bank of Ireland Group.
Tata Motors and JLR also expect a long-term loan from the European Investment Bank (EIB) of £340 million (Rs 2,700 crore) to be successfully secured in the coming weeks through "appropriate commercial arrangements".
"With the positive trend in the external environment in financial markets and improvement in general liquidity, these arrangements have been and are expected to be concluded without necessitating guarantees from the UK government, for which discussions had been ongoing for some time," said a statement from Tata Motors.
Tata Motors bought JLR from Ford Motor Company for $2.3 billion in mid-2008 and had funded this through $3 billion worth of debt.
For now, neither Tata Motors nor JLR are willing to share the source of this £175 million that has been secured. However, market sources said commercial banks both in India and the UK have agreed to lend money to JLR on commercial terms.
JLR's CEO David Smith said, "It is a positive sign for our business that we have been able to attract sufficient funding for our short-term needs through normal commercial means. This has always been our desired route and it clearly demonstrates recognition of the inherent strength in our business and faith in our future business plans."
Welcoming today's development, UK's Business Secretary Peter Mandelson said, "The fact that the banks and commercial capital markets are meeting JLR's funding is a clear sign of confidence in the company, its products and the automotive sector."
Tata Motors has been involved in tough negotiations with Mandelson to secure the UK government's support without any condition that might seemingly interfere with its day-to-day operations. Last month JLR reiterated its stand that it would not offer a board berth to the UK government in return for a loan guarantee.
The issue of securing a guarantee from the UK government came to an end today after Tata Motors' Chairman Ratan Tata wrote to Mandelson informing him that the company had secured loans without the UK government's aid.
Industry analysts, however, expressed disappointment at the fact that while JLR's competitors in France and Germany managed to get their respective government's support, iconic British brands had failed to get the UK government's support.
Fraught four-month-long negotiation between Tata Motors-owned Jaguar Land Rover (JLR) and the UK government over a loan guarantee ended in an anti-climax today, with the Mumbai-headquartered automobile maker announcing that it has secured loans from commercial banks and would not need any support from the UK government.
Even though neither Tata Motors nor JLR specified how much it raised, it is understood that this could be in the vicinity of £175 million (Rs 1,400 crore).
Today's announcement comes a day after JLR said it had successfully secured a financing facility of up to £75 million (Rs 600 crore) for Land Rover's working capital needs from Burdale Financial Ltd, a member of the Bank of Ireland Group.
Tata Motors and JLR also expect a long-term loan from the European Investment Bank (EIB) of £340 million (Rs 2,700 crore) to be successfully secured in the coming weeks through "appropriate commercial arrangements".
"With the positive trend in the external environment in financial markets and improvement in general liquidity, these arrangements have been and are expected to be concluded without necessitating guarantees from the UK government, for which discussions had been ongoing for some time," said a statement from Tata Motors.
Tata Motors bought JLR from Ford Motor Company for $2.3 billion in mid-2008 and had funded this through $3 billion worth of debt.
For now, neither Tata Motors nor JLR are willing to share the source of this £175 million that has been secured. However, market sources said commercial banks both in India and the UK have agreed to lend money to JLR on commercial terms.
JLR's CEO David Smith said, "It is a positive sign for our business that we have been able to attract sufficient funding for our short-term needs through normal commercial means. This has always been our desired route and it clearly demonstrates recognition of the inherent strength in our business and faith in our future business plans."
Welcoming today's development, UK's Business Secretary Peter Mandelson said, "The fact that the banks and commercial capital markets are meeting JLR's funding is a clear sign of confidence in the company, its products and the automotive sector."
Tata Motors has been involved in tough negotiations with Mandelson to secure the UK government's support without any condition that might seemingly interfere with its day-to-day operations. Last month JLR reiterated its stand that it would not offer a board berth to the UK government in return for a loan guarantee.
The issue of securing a guarantee from the UK government came to an end today after Tata Motors' Chairman Ratan Tata wrote to Mandelson informing him that the company had secured loans without the UK government's aid.
Industry analysts, however, expressed disappointment at the fact that while JLR's competitors in France and Germany managed to get their respective government's support, iconic British brands had failed to get the UK government's support.
Saturday, July 18, 2009
UK dept under fire for delay in lending to JLR
S Kalyana Ramanathan / London July 18, 2009
The Business & Enterprise Committee in the UK, appointed by the House of Commons to examine the expenditure, administration, and policy of the Department for Business, Enterprise & Regulatory Reform (BERR), has voiced its disappointment over the government’s delays in providing support to the cash-strapped Jaguar Land Rover (JLR), the Midlands-based car maker which is now a part of Tata Motors.
In a report submitted by this committee, it said: “Despite its strategic importance and although the government considered that Jaguar Land Rover was a ‘top priority’, the company told us it had proved impossible to conclude negotiations between the company and BERR about the terms of a guarantee, even though it had already received loan approval from the EIB for a substantial facility, £340 million, against our future technology investments.”
“All that is under discussion is the government’s guarantee. As on 7 July 2009, there has been no indication that there will be such a guarantee: we are astounded that it has taken so long to arrange this, particularly since the support needed is so limited,” the committee’s report said.
Though European Investment Bank (EIB) had approved a loan of £340 million for JLR to invest in “green technologies” in the first week of April 2009 to help it compete with other major European luxury car makers like BMW and Daimler, JLR has been unable to access this money for want of a guarantee from the UK government. It has been widely reported that the conditions posed by the UK government have been too stringent and may come in the way of smooth operations of the car marker.
Earlier last week, in an exclusive interview to Business Standard, JLR’s CEO David Smith said, though he was hopeful of securing this guarantee, the company was willing to do so only on commercial terms and the company will not offer the UK government a berth on its board.
“I think we all believe that the government is not very good at running companies. Anything we agree with the government or in fact 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,” Smith had said.
Reacting to the committee’s remonstrance at the government’s delay in providing the guarantee, JLR today said: “We welcome the committee’s conclusion that the UK industry has strong premium brands which, together with the supply chain, can lead the transition to low carbon vehicles as outlined in the recent NAIGT report. Jaguar Land Rover is playing a full role, investing over £800 million to reduce vehicle CO2 emissions and improve fuel efficiency. The report refers to the delay in drawing down the £340-million European Investment Bank loan for green technologies approved in April, which supports our investment plans. Clearly, we are eager to see this resolved as soon as possible.”
Smith was among the experts who gave evidence to the committee. Today he echoed the sense of urgency expressed in the report.
“For a year now, Jaguar Land Rover and other UK automotive exporters have been conducting business in the face of a severe recession that has stalled global economies. I fully support the Business and Enterprise Committee’s call for urgent action to allow the UK automotive industry to survive this crisis, coupled with a long term strategy to enable motor manufacturing to flourish in the UK. Environmental innovation is absolutely critical to our future and, if we are serious about a low carbon industry in the UK, we are going to have to decide to invest in it now,” he said.
Wednesday, July 15, 2009
Jaguar stops production of popular model, cuts 300 more jobs
S Kalyana Ramanathan / London July 16, 2009
Tata Motors-owned Jaguar Land Rover (JLR) today announced 300 more job cuts at its Halewood Plant in Merseyside, where it plans to cease production of the Jaguar X-TYPE, an eight-year-old range of vehicles that until recently constituted nearly a fourth of total annual production.
Over 350,000 units of the X-TYPE were sold over the past eight years; it has been one of the most successful models to roll out of Jaguar.
Said CEO David Smith: “Our industry has been especially badly hit by the recession and the premium sector more than others. Jaguar Land Rover’s retail sales fell by 28 per cent in the past 10 months. We have taken unprecedented actions to cut costs, including reduced production volumes, significant cuts to investment plans and some 2,200 job losses. Ceasing production of the X-TYPE early, with further redundancies and temporary shutdowns at Halewood, is necessary to protect our other investment plans.”
In a statement issued to the media, the company said it also expects the need to take a further three weeks or more of shutdown of the Halewood plant over the balance of this year, starting in September, due to on-going weakness in the market. “Further actions will be determined by the state of the market and the speed with which the already-approved ¤340 million European Investment Bank loan can be drawn,” the company said.
Yesterday, amidst fear of the closure of the Halewood plant, the country’s Business Secretary (minister) Lord Mandelson said he would do everything inhis power to keep the plant open. “We do need to be confident that the taxpayers’ money that goes into Jaguar will come back out again – that the taxpayer won’t be left high and dry,” he said in an interview to Liverpool Daily Post.
The Halewood plant of JLR is one of the smallest among its four UK assembly plants in numbers employed. Halewood currently has around 2,000 employees, as does Castle Bromwich, with Solihull at around 5,000, and 3,000 at the Gaydon and 2,000 at the Whitley R&D centres.
Last year 16,320 X-TYPEs were sold out of the overall Jaguar total for the year, of 65,446. Admitting that ceasing the output of X-TYPE would be a major cut in its proudction, the company spokesperson said other models would take its place to fill the gap. “...We are rebuilding Jaguar. The new XJ is a product we are very excited about and think will really change perceptions of the brand, following what we have already done with XK and XF over the past three years. The XF has good orders with 10MY versions - the XFR and 3 litre diesel particularly, and we will be launching the new XJ as the X-TYPE disappears, which we expect to record strong orders.”
Tata Motors-owned Jaguar Land Rover (JLR) today announced 300 more job cuts at its Halewood Plant in Merseyside, where it plans to cease production of the Jaguar X-TYPE, an eight-year-old range of vehicles that until recently constituted nearly a fourth of total annual production.
Over 350,000 units of the X-TYPE were sold over the past eight years; it has been one of the most successful models to roll out of Jaguar.
Said CEO David Smith: “Our industry has been especially badly hit by the recession and the premium sector more than others. Jaguar Land Rover’s retail sales fell by 28 per cent in the past 10 months. We have taken unprecedented actions to cut costs, including reduced production volumes, significant cuts to investment plans and some 2,200 job losses. Ceasing production of the X-TYPE early, with further redundancies and temporary shutdowns at Halewood, is necessary to protect our other investment plans.”
In a statement issued to the media, the company said it also expects the need to take a further three weeks or more of shutdown of the Halewood plant over the balance of this year, starting in September, due to on-going weakness in the market. “Further actions will be determined by the state of the market and the speed with which the already-approved ¤340 million European Investment Bank loan can be drawn,” the company said.
Yesterday, amidst fear of the closure of the Halewood plant, the country’s Business Secretary (minister) Lord Mandelson said he would do everything inhis power to keep the plant open. “We do need to be confident that the taxpayers’ money that goes into Jaguar will come back out again – that the taxpayer won’t be left high and dry,” he said in an interview to Liverpool Daily Post.
The Halewood plant of JLR is one of the smallest among its four UK assembly plants in numbers employed. Halewood currently has around 2,000 employees, as does Castle Bromwich, with Solihull at around 5,000, and 3,000 at the Gaydon and 2,000 at the Whitley R&D centres.
Last year 16,320 X-TYPEs were sold out of the overall Jaguar total for the year, of 65,446. Admitting that ceasing the output of X-TYPE would be a major cut in its proudction, the company spokesperson said other models would take its place to fill the gap. “...We are rebuilding Jaguar. The new XJ is a product we are very excited about and think will really change perceptions of the brand, following what we have already done with XK and XF over the past three years. The XF has good orders with 10MY versions - the XFR and 3 litre diesel particularly, and we will be launching the new XJ as the X-TYPE disappears, which we expect to record strong orders.”
Friday, July 10, 2009
There are exciting opportunities for business'
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.
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.
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