Monday, November 15, 2010

That is Ratan Tata...........

I just went through this article in Today's "Live Mint" e paper and I was facinated to read the whole story......I like reading such stories even though I am not a business man.I like people who makes miracles.I like people who turns around loss making Co in a profit making Co.
The bet of buying JLR was misfired according to the analyst and see the turnaround! From a mere 22 cr profit same time last year it jumped to 2230 cr this year in a single quater! Wow!....$500 mn !......That is what I call atitude.That is what I call character.That is what I call a regirous invovlement to be successful.
Well, reading this can also makes us take some decision good.Read and learn.
That is Ratan Tata for US.We are proud of Ratan.He is in real sense Ratan for India.......

Read on:

When Tata Motors Ltd bought Jaguar Land Rover (JLR) for $2.3 billion in 2008, it quickly became appar- ent that the Indian auto maker couldn't have chosen a worse time for an acquisition of that magnitude.

The collapse of the mortgage market in the US had set off a financial crisis and no one with cash was in any mood to lend it.
Amid talk of the UK govern- ment contemplating a bailout of JLR, Tata Motors' market value plunged to `6,503.2 crore, with the stock hitting rock bottom `126.45 on 20 No- vember 2008. The market capi- talization was less than what it had paid Ford Motor Co. for the legendary British marques.
In the fiscal ended March 2009, Tata Motors posted its first annual loss in at least sev- en years after sales at the luxu- ry unit plunged amid the glob- al slump.
The consolidated net loss was `2,500 crore in the year ended 31 March, compared with a profit of `2,200 crore in the year earlier. The JLR unit made a pretax loss of `1,800 crore as unemployment and the financial crisis damped sales in the US and Europe.
Only two years later, howev er, JLR has turned around spectacularly. With JLR ac counting for more than half o Tata Motors' business, the company posted a 100-fold jump in profit in the three months to 30 September. The UK subsidiary has been gener ating a cash profit for the las four quarters.
Favourable external factors including currency move ments and a rebound in de mand for the luxury marques may have aided the turn around, but JLR's comeback i more than a result of fortuitou circumstances. The foundation for the transformation was be ing laid even during the pain ful months of struggle that fol lowed the acquisition.
Mint chronicles the story o the turnaround, how an Indian company that specialized in cheap small cars on the one hand and trucks on the othe succeeded where an iconi auto maker, and others before it, had failed.

In the summer of 2007, before Tata Motors Ltd took over Jaguar Land Rover (JLR), Ratan Tata and Ravi Kant embarked on a trip through the US. Their objec- tive--to gauge whether the leg- endary British marques still evoked enough passion in the biggest market for the vehicles to justify the acquisition.
The Tata group was among those that Ford Motor Co., which owned JLR at the time, had approached earlier in the year to discuss a possible sale.
Among the people that chair- man Tata and Kant, then man- aging director of Tata Motors, met were the long-suffering dealers of the two brands. De- spite the dismal performance over the past few years, the dealers still kept the faith, the Indians were heartened to learn. A few months later, when Kant did the rounds of dealers in the UK, he met with much the same response-- they still believed in the brands.
But when the $2.3 billion (`10,258 crore today) deal took place the next year, it was quickly apparent that Tata Mo- tors couldn't have picked a worse time to make an acquisi- tion of this magnitude. The collapse of the mortgage mar- ket in the US had set off a fi- nancial crisis and anyone who had cash wasn't in the mood to lend it.
Two years and a few months since then, JLR's contribution has helped Tata Motors post a steep rise in profit in the quar- ter to 30 September. So how did an Indian company that specialized in cheap small cars, on the one hand, and trucks, on the other, succeed where an icon- ic auto maker, and others be- fore it, had failed.
The top ex- ecutives at Tata Motors, usually most reti- cent, opened up for the first time about the JLR story at an exclusive interaction in Bom- bay House, the Tata group's headquarters. Those present at the meeting included Carl-Pe- ter Forster, managing director of Tata Motors group, Ralf Speth, chief executive officer of JLR, and a top group execu- tive who was intimately associ- ated with the turnaround saga, but insisted that he remain un- named as he wasn't directly associated with the unit any longer.
Soon after the acquisition in 2008, Tata Motors found itself saddled with a debt of `21,900 crore, an uncomfortable posi- tion for a company that had been virtually debt free.
Meanwhile, at the other end of the spectrum, through 2008 and the early part of 2009, Tata Motors was also involved in developing and launching the world's cheapest car, Nano, a project that was fraught with its own melodramatic ups and downs. But that's another story (see WEF special supplement).
Hard times At JLR, the product wasn't moving and Bombay House was beginning to feel stretched.
Amid talk of the UK govern- ment contemplating a bailout of JLR, Tata Motors' market value plunged to `6,503.2 crore, with the stock hitting rock bottom `126.45 on 20 No- vember 2008. The market capi- talization was less than what it had paid Ford for JLR.
“The global slowdown put the company under tremen- dous pressure because the management of JLR had just separated from one big organi- zation and was attaching itself to another not-so-big group and they were not yet kind of experienced living indepen- dently,“ said the Tata executive mentioned above. “We were bleeding.
Banks were not giving any money, they were not avail- able, they were closed. And we needed mon- ey.“
That's when Ratan Tata came through for Tata Mo- tors, with the parent pumpparent pump- ing in capital, driven by the be- lief that the JLR acquisition was right and would work. While the turnaround, when it took place, came as a surprise, Tata Motors saw it three-four quar- ters in advance.
But before that, in the fiscal ended March 2009, Tata Mo- tors posted its first annual loss in at least seven years after sales at the luxury units plunged amid the global slump. The consolidated net loss was `2,500 crore in the year ended 31 March, com- pared with profit of `2,200 crore in the year earlier. The JLR unit made a pretax loss of `1,800 crore as unemployment and the financial crisis damped sales in the US and Europe.
Cash remained “priority No.
1“ as JLR was haemorrhaging money and the company sought outside help.
As JLR didn't have a cash management system of its own, Tata Motors turned to consult- ants KPMG, Forster said.
For the next few months, “cash started to be managed on an hour-to-hour basis-- what cheque was going out, what cheque was coming in“. KPMG declined to participate in the story. Around the same time, in the spring of 2009, Munich- based Roland Berger Strategy Consultants was brought in to keep a tab on costs. The man- date to Roland Berger was sim- ple: make JLR profitable.
Cash management “A three-tier model was de- veloped,“ said Wolfgang Bern- hart, partner, Automotive Competence Center, Roland Berger. First, a short-term goal to manage liquidity with the assistance of KPMG was put in place.
Then came a mid-term target to contain costs at various lev- els and the formation of 10-11 cross-functional teams, Bern- hart said. A number of man- agement changes, including new heads at JLR, were made.
Finally, a long-term goal that runs until 2014 was drawn up, focusing on new models and refreshing the existing ones.
The key aims--cash manage- ment and checking costs.
When Roland Berger added up the money that could be saved, the company was aston- ished at how high the figure was.
A team of young managers was put in charge, in an ap- proach similar to the one fol- lowed in the 2003 restructuring at Tata Motors, with reviews on a daily basis.
Tata Motors also embarked on a plan to divest stakes in group companies to raise cash: In September 2008, it sold a 1.3% holding in Tata Steel Ltd to holding company Tata Sons Ltd for a total `485 crore. In November 2008, the board ap- proved a `4,147 crore rights of- fer, which was completed in June this year.
All proceeds were chan- nelled into Tata Motors to make JLR profitable. Crucially, Tata Motors was able to keep product development plans go- ing, which has paid off with the global economy reviving and customers returning to JLR showrooms.
The programme also saw the workforce being trimmed since July 2008 by around 11,000 from a gargantuan workforce of 27,000 at JLR. According to chief financial officer C. Ram- akrishnan, who spoke to analysts after announcement of the September quarter results, the workforce was trimmed by an- other 1,800 to 16,000.
JLR's turnaround has been aided by external factors. In a 9 November earnings call with analysts, Ramakrishnan said margins had benefited from fa- vourable currency movements, widening by one percentage point to 16.6%, over the first quarter of 2010-11. However, the extent of the turnaround can be gauged when margins are compared with corre- sponding quarter of previous year. Margins rose by a whop- ping 1,370 basis points or 13.7% from 2.9% in 30 Septem- ber 2009-10, reflecting the changed dynamics of the com- pany as sales rose sharply on the back of new product launches and improved market sentiments. About half the firm's turnover is dollar-linked while one-fifth is linked to the euro. The rupee has strength- ened against both currencies this year. Since January, the pound has strengthened 4.9% against the dollar and 7.7% against the euro.
The turnaround Sales are buoyant thanks to the introduction of newer, more fuel-efficient and con- temporary models coupled with the revival of demand in the firm's key markets such as the UK, the US and Europe.
Despatches of JLR models to dealers globally rose to 115,508 units in the six months to Sep- tember from 80,252 in the year ago. The new Jaguar XJ has been especially successful, with 8,700 of them having been sold since the model's launch in mid-May.
With JLR accounting for more than half of Tata Motors' business, the company posted a 100-fold jump in profit in the three months to 30 September.
The debt-to-equity ratio is down to 1.6 times at the con- solidated level from from 4.5 times at the end of 31 Decem- ber 2009. That's high but com- fortable given surging volumes.
The share has risen to a re- spectable `1,302.15 at close on 10 November on the Bombay Stock Exchange, taking market capitalization to `79,573.08 crore ($18 billion).
The first real contact be- tween Tata and Ford took place in early 2007 when Ratan Tata got “an informal brief“ on JLR.
Tata asked Kant and other se- nior Tata Motors executives if the acquisition made sense.
When he got a positive answer, Tata Motors began a nine- month due diligence process.
There were five key issues that persuaded Tata Motors to go ahead. While Jaguar had a mixed reputation, both were still “great brands“. Ford had pumped in a great deal of cash to improve quality and it was just a matter of time before this made a difference. Second, JLR had very good automobile plants. Third was the steadfast- ness of the dealers despite loss- es over the past four-five years.
Jaguar cars had already start- ed moving up the ranks of the annual JD Power customer sat- isfaction rankings. Besides that, there was a crop of great new models in the pipeline, among them the Jaguar XJ and XF and the upcoming Land Ro- ver, which convinced Tata Mo- tors that JLR was on the cusp of change.
Ultimately, Forster says, it boiled to down to this: JLR had a good engineering base and “a very passionate and committed group of people wanting to cre- ate new products.
“So if you put it all together, we have a recipe for success,“ said the Tata executive cited above. “What else can you ask for? At least there was no doubt in Mr Tata's mind and my mind that we should go for it with a single-minded focus and we went for it.“ Union backing One of the early endorse- ments that Tata Motors got was from the unions, though they gave the firm a grilling.
“We had this meeting (in late 2007) with the union, a very difficult one for three hours. It was eyeball-to-eyeball. Dave (Osborne, Unite's lead negotia- tor for the car industry) and Tony (Woodley, Unite joint general secretary) were asking very tough questions. We didn't have too much hope,“ said the Tata executive. “But somewhere in my heart I felt the meeting had gone well. We came out very transparent, sin- cere, and honest.“
The union leaders told the media after the meeting that their preference was for the In- dian company.
While Tata Motors seems to have done all the right things up until now, making the ac- quisition fit with Tata's strategy of developing low-cost cars for emerging markets won't be easy.
“Tata has done a good job in a difficult period,“ said Prashant Kale, professor of strategy at the Jones School of Management at the Texas- based Rice University. “But to me, this is more of a stan- dalone turnaround of JLR until now,“ said Kale, who works with some Tata group compa- nies “On the face of it, there seem to be limited operational syn- ergies between JLR and Tata Motors' remaining passenger car business, given the differ- ence in the primary segments they cater to and the underly- ing value chain or business models of the two. How Tata Motors is able to leverage those synergies would be interest- ing.“
Forster is of the view that more than synergy, the group will stress on entrepreneurial spirit.
While Speth says it is time to enjoy the fruit of the invest- ment made in 2007-08, Forster, careful not to appear compla- cent, says seeds “are being sown to be reaped in 2014.“
Tata Motors plans to pump £800 million-1 billion (`5,728-7,160 crore) into JLR in the next three-four years for product development, technol- ogy upgradation and capital expenditure needs. The UK subsidiary, which contributes two-thirds of Tata Motors' con- solidated revenue, has been generating a cash profit for the last four quarters. In the three months to September, JLR made a cash profit of £351.9 million, up 12% from the year earlier.
With an eye to the future, JLR is setting up manufacturing as- sembly units in India and Chi- na, the markets touted as the fastest growing in the world.
The Freelander, the cheapest of the sports utility vehicles from the Land Rover stable, will start rolling out from the old Tata-Mercedes assembly plant near Pune next year. JLR is also in advanced negotia- tions to set up a joint venture in China, Speth said, adding that this will allow the compa- ny to reduce prices by 35%, making the vehicles more com- petitive.
“We can rethink our aspira- tions in China (a market with a size of 17 million cars) through this JV,“ Speth said.
Since the Tata Motors acqui- sition, JLR has been looking at the Bric (Brazil, Russia, India, China) nations with greater in- terest, he said. These nations account for 31% of sales and the company wants to raise that to 37%. Speth expects Chi- na to account for 16% of the company's total sales over the next few years.

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