JLR hits the bottom line of Tata Motors hard, real hard

Tata Motors posted it's first annual loss in about seven years and this has been attributed to the luxury brands which the company acquired last year. The net loss for the company was reported to be around 2500 crore in the just ended financial year and this is at a stark contrast to 2200 crore profits that the company posted in the previous financial year. The previous financial numbers does not include Jaguar and Land Rover, the brands that the company acquired from the Form Motor Co.

Its true that there aren't many like Tata Motors in the world. Tata Motors has become a unique company in the portfolio that the company has to offer. How many auto majors have cars that can sell at 2500 USD on one hand and 100,000 USD on the other? However, no such tag or any unique identification is as good as the cash that the company can make. What good does any good attribute do if the company is making losses and eroding the investor's value?

The JLR unit had reported a loss of around 1800 crore in the pre tax numbers as the sales in the US and European markets slumped. Well, its a different story that Tata motors is not alone in the Luxury segment. BMW and Daimler have also been reporting losses for the past few quarters. About 120,000 Land Rovers have been sold in the 10 months ending Mar 31 2009, down from about 198,000 for the corresponding period a year ago. Jaguar sales fell to 47,000 units compared to 48,000 units in the previous year.

It's at least good that these kind of numbers were expected ever since the acquisition was announced. Turning around JLR has always been a tough task for Tata Motors. The way in which Tata Motors have worked, the kind of cars that the company had produced, the market that the company was catering to, the technology that the company has been using were all completely different with the ones of JLR. It will take time for the company to adapt to JLR before they can think of turning around.

The company has announced that 2000 jobs have been blown away in the air and there could be much more in the offing in the time to come. What better way to turn around ? :) With these kind of problems on one hand, the UK government on its part have been showing strict resistance in giving guarantee to the loans for Land Rover. The company has been reporting that it has been in constant touch with the UK govt to secure the guarantee for a 340 million pound loan.

Tata Nano will hit the roads soon. However, its going to take good amount of time for the little Nano to do any kind of big help to the company. Tata Motors had previously planned to launch the luxury vehicles in the Indian Markets tomorrow. One could expect these launches to get very good support from the domestic market.

To contact the equity analyst on this story: Arun Gopalan in Chennai at Arun@hbjcapital.com