Throwback Thursday: Tata Motors completes acquisition of Jaguar Land Rover

On June 2 in 2008, Tata Motors formally acquired the Jaguar Land Rover business from Ford Motor Company for a net consideration of US$ 2.3 billion (around Rs 9,200 crore then) in an all-cash transaction. Ford had contributed about US$ 600 million to the Jaguar Land Rover pension plans.

Ratan Tata, chairman of Tata Sons and Tata Motors, was present at the handing over ceremony at the headquarters of Jaguar Land Rover at Gaydon in the UK, along with Don Leclair, the executive vice- president and chief financial officer of Ford Motor Company. Also present were David Smith, CEO, Jaguar Land Rover and Lewis Booth, executive vice-president of Ford Motor Company, who had responsibility for Ford of Europe, Volvo and Jaguar Land Rover.
 

L-R: Lewis Booth, EVP, Ford Motor Company; David Smith, CEO, Jaguar Land Rover; and Ratan Tata, chairman, Tata Motors, in Gaydon, UK, on June 2, 2008.  

Ratan Tata had commented on the occasion, “This is a momentous time for all of us at Tata Motors. Jaguar and Land Rover are two iconic British brands with worldwide growth prospects. We are looking forward to extending our full support to the Jaguar Land Rover team to realise their competitive potential.”

Background to the historic deal

On December 30, 1998, Tata Motors had officially launched its game-changing product, the Indica. Within a week, the car had received 115,000 bookings! However within a year, the company was having trouble selling its hatchback. Hence, Mr Tata travelled to the US to meet Ford to sell off the company’s passenger car division. However, it is believed that the meeting did not pan out as optimistically as Mr Tata had planned. 

Fast forward to 2008, the world was seeing an economic meltdown and Ford was one of the worst sufferers. The American carmaker had spent a fortune to acquire Jaguar in 1990 (US$ 2.5 billion). A decade later, it paid a similar exorbitant US$ 2.8 billion for Land Rover!

On March 26, 2008, nearly 10 years after he met Ford Motor Co, Mr Tata announced the plan to acquire Jaguar Land Rover. 

Acquiring the legendary British brands

Despite the deal, several critics questioned the acquisition. Steering JLR through the financially difficult times was one of the biggest tasks for Tata Motors.

Speaking to Hormazd Sorabjee, editor, Autocar India in 2012, Mr Tata explained, “My vision for the company was to come out of the recession stronger in terms of products and not the same or a weaker one than when the recession hit us. Regrettably, we didn’t get much encouragement from government and I’ve always said the organisation that really stood by us was the State Bank of India, which guaranteed various loans and enabled us to go through the crisis. We are reaping the benefits now, arising from those actions. If you look at the aftermath, sceptics were saying that JLR will have to downsize from three plants to two and now you can see that all three plants are running at full capacity and we are looking at moving to double shifts.”

Fast forward four more years, Tata Motors’ Q4 FY2016 results provide you the complete story of turnaround.

Strong growth in volumes for its British luxury car brand Jaguar Land Rover helped home-grown Tata Motors triple its consolidated net profit in the quarter ended March to Rs 1,716.5 crore, while net sales grew 18.76% to Rs 79,926.8 crore. JLR’s net profit rose 56.29% to 472 million pounds (Rs 4,629 crore) while net sales increased 13.18% to 6,594 million pounds (Rs 64,681 crore). The profits included a one-time gain of 58 million pounds (Rs 555 crore) on account of insurance claims related to the losses due to the Tianjin blasts.

Today Jaguar Land Rover, after making a dramatic turnaround, is the mainstay of Tata Motors’ finances, apart from Tata’s traditionally successful commercial vehicle division.