Tata Motors. Profile of an Indian Car Company in Trouble

by John Horner

Published: February 2nd, 2009

India’s Tata has gone from darling to dumpling in just a year. The high profile Nano People’s Car project still hasn’t gone into production, and the $2.3b purchase of Jaguar and Land Rover now seems spectacularly ill-timed. Business Week recently covered the story with these great opening notes: “What a difference a year makes.” India is in the throes of its own economic crisis; thanks to high inflation, high interest rates, tight credit markets, excessive corporate debt and a suddenly spending averse middle class. Pretty much like most places in the world, but a little different.

The Nano project crashed into a virtual brick wall last year when local protests caused Tata to abandon the nearly completed Nano production facility; after investing $350m . . . and before building any saleable cars.

Meanwhile, Tata’s big dog status in India’s commercial vehicle market (over 60 percent share) became a liability when that market plunged precipitously (40 percent!). India faces its first manufacturing and services exports decline in modern history.

Government spending, however, is being ramped up to soften the blow to Tata. Ergo: “On Wednesday, the company bagged a $450 million, 12-year contract to build and maintain buses for the city of New Delhi, which is in the midst of upgrading its infrastructure.”

Sounding familiar yet?

While all that is going on at home, the expensive short term bridge loans used last year to temporarily finance the Jaguar/Land-Rover purchase are coming due with no real prospects for replacing them. Although the UK has announced loans to keep the British auto industry afloat, it isn’t clear if Tata will be able to get its mitts on any of that money to pay down those bridge loans.

The usual unnamed sources at Tata are said to have said: “Of course, we plan to apply for as much help as we can get under that program, but the indication we’ve gotten from the [government officials] there is that the loans are intended to help keep production lines running, not directly pay off accumulated debt.”

The rapid expansion of Tata on the backs of a booming home market, executive enthusiasm and easy credit markets has put the company in dire stress. But, hey, Tata can take some small comfort that it is in better shape than outsourcing titan Satyam Computer Services, which has seen three executives (so far) carted off to jail in a billion dollar accounting scandal.

Compared to that, Tata is in good shape. Rut row.

#India #Jaguar #JohnHorner #LandRover #Nano #Tata

John Horner

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Kurt. on Feb 03, 2009
Geo. Levecque asked "why should the UK Taxpayer pay for them to make Cars?" Because those cars are STILL built in the UK, with (some say) UK workers. If Tata has to close those plants, the UK will be paying anyway with unemployment and lost wages in their communities. I could be way off base here but aren't the Rover engines built in Germany? Maybe the Germans will fess up some cash too? Time to go a beggin'...

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Jack Baruth on Feb 03, 2009

I admire Mr. Tata for his determination to put his people on wheels, but the Nano and its inevitable competition would have amounted to a climatological apocalypse. Assuming you believe in AGW, that is. It would be better, from a resource consumption standpoint, to simply wave a magic wand and turn every new car on sale in the United States into an Escalade ESV.

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