Tata Motors' Acquisition of Daewoo Commercial Vehicles
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Case Details:
Case Code : BSTR158
Case Length : 16 Pages
Period : 2003 - 2005
Organization : Tata Motors
Pub Date : 2005
Teaching Note : Available
Countries : India
Industry : Heavy Commercial Vehicles
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Exhibits
The Acquisition
In July 2003, Praveen Kadle (Kadle), Executive Director,
finance and corporate affairs at Tata Motors, called Ravi Kant (Kant), Executive
Director, commercial vehicles business unit, for a meeting. The agenda was to
know if Kant was interested in taking up the bid for DWCV...
Synergies
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Most analysts felt that the DWCV acquisition was a perfect fit. According to
Satish Ramanathan, an analyst at ICICI Securities, "The fit is very good and
will incrementally add around four to five percent to turnover and the same
amount to profit."The acquisition would enable Tata Motors to increase both its
domestic and export earnings.
Tata Motors' technology was focused on the lower end of heavy trucks of up to
210 hp. The DWCV trucks ranged between 210 to 450 hp. This product range could
help Tata Motors to check competition from Volvo's Indian unit. In the words of
Morgan Stanley analyst, Satish Jain, DWCV would serve as Tata Motors' platform
in Southeast Asia, and would also help expand its product range in its existing
markets - including India...
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Integration Issues
Kant was nominated as chairman of TDCVC. Kwang-Ok Chae (Chae) was retained as
the CEO and president, while Kadle was appointed on the board of the
company. DWCV products would continue to sell under the DWCV brand name till
a decision was taken about the new branding of the products...
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Outlook
According to Graeme Maxton (Maxton), managing
director (Asia Pacific) of a leading auto industry portal, autopolis.com,
the biggest market share gainers in the next eight years would mostly be
small automobile firms like First Automotive Works (FAW) and Shanghai
Automotive Industry Corporation (SAIC) in China, Auto Vaz in Russia, and
Tata Motors in India.
According to him, Tata Motors was poised to gain because of its low-cost
quality manufacturing at close to European standards."His view is
contrary to the conventional wisdom that industry consolidation will see
fewer and bigger auto companies emerging over the next decade or so...
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Exhibits
Exhibit I: Tata Motors Profile
Exhibit II: Tata Motors Timeline
Exhibit III: Brief History of Daewoo Commercial Vehicles
Exhibit IV: Share Price Trend for Tata Motors
Exhibit V: Tata Motors' Globalisation Strategies
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