Tata Motors in Trouble
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Case Code: BSTR314 Case Length: 18 Pages Period: 2007-2009 Pub Date: 2009 Teaching Note: Available |
Price: Rs.300 Organization: Tata Motors Industry: Automobiles Countries: India/UK/US Themes: Competition, Collaboration, Entry Strategy, Expansion Strategy |
Abstract Case Intro 1 Case Intro 2 Excerpts
"The rapid reversals at Tata Motors, which is probably the most internationally visible of Indian automakers, mirror the suddenness with which many Indian companies have seen their fortunes change as global lines of credit have frozen and the local economy has slowed down."
-BusinessWeek in January 2009.
"We are clearly in very difficult times, in difficult trading conditions. Unfortunately, what we've got now is a situation where consumers aren't spending and banks aren't lending, so it's a double whammy."
- David Smith, CEO, JLR, in January 2009.
Tata Motors Reports Loss
In late January 2009, Ravi Kant, the Managing Director of India-based Tata Motors Limited (Tata Motors), deliberated on the decisions that had gone wrong for his company during the calendar year 2008. The year was supposed to be a milestone in the history of Tata Motors. In January 2008, the company unveiled Nano, a Rs.100,0004 car, by far the cheapest car in the world, amidst much fanfare. This event was followed by the acquisition of British brands - Jaguar and Land Rover (JLR) from Ford Motor Company (Ford) in June 2008.
The management of Tata Motors was of the view that the acquisition of JLR, which had a global presence and a repertoire of well established brands, would help the company become one of the major players in the global automobile industry. However, things did not turn out the way Ravi Kant had expected. Due to the global financial crisis that deepened further with the collapse of Lehman Brothers in September 2008, consumer demand plummeted and global lines of credit were frozen. Consequently, Tata Motors' financial position for the third quarter ending December 2008 presented a bleak picture.
The company reported a loss of Rs. 2.63 billion, compared to a profit of Rs. 4.99 billion during the third quarter ending December 2007. Tata Motors reported a quarterly loss after a span of seven years. In the December 2008 quarter, Tata Motors' reported a sales volume at 98,760 vehicles as compared to 144,608 vehicles during the corresponding quarter of the previous year. Mentioning the reasons for the company's poor performance, the management said, "In the October-December quarter of the financial year 2008-09, the automotive sector in India suffered severe contraction in demand, arising from major financial and other market upheavals. This exacerbated the lack of liquidity and unavailability of consumer finance."....
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