Tata

1. Back ground.

Tata Motors’ long-term strategy included consolidating its position in the domestic Indian market and expanding its international footprint by leveraging on in-house capabilities and products and also through acquisitions and strategic collaborations. Tata wanted to strength their lineup of the products from low-end to high-end customers to compete their competitors. On June 02, 2008, Tata Motors completed the acquisition of the Jaguar and Land Rover (JLR) from Ford Motor Company (Ford) for US$ 2.3 billion, on a cash free debt free basis. Jaguar was involved in the manufacture of high-end luxury cars, while Land Rover manufactured high-end SUVs.

Ford had bought Jaguar for US$ 2.5 billion in 1989 and Land Rover for US$ 2.7 billion in 2000. Ford had plans to produce around 400,000 units a year to compete with like of Mercedes Benz, Audi, and BMW. In 2002, the sales of Jaguar reached 130,000 which are far away from the target. Ford had improved Jaguar engineering standards but its image had taken a downturn. The Jaguar gradually became known as basically an old man’s car. Ford had spent over US$ 10 billion on Jaguar since acquiring it. In the fiscal 2006, Jaguar reported a loss of US$ 327 million. On the other hand, Land Rover was on its way to profit and recorded sales of 192,000 units in 2006. Ford, however, reported losses of US$ 12.7 billion in the year 2006. This situation let Ford to decide to sell JLR.

2. Evaluate Ford’s decision to sell Jaguar Land Rover

For the following reasons, I would like to say Ford could have wait and then make the decision till JLR have turned over. Ford, however, had to sell JLR because Ford was facing to a severe situation and needed cash to overcome it. Ford also had a option to sell only Land Rover.

Positive reasons

* Spent over US$ 10 billion on Jaguar is a sunk cost. The important point is generating profit and cash, however, Jaguar was not generating profit.

* Ford had a severe situation in...