Tata Looks for Jaguar Land Rover Partners, But Rules Out Sale
(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here.
The Indian conglomerate that owns Jaguar Land Rover said it is open to finding partners for the automaker but isn’t planning on selling the embattled unit.
“We’re not going to sell,” said Natarajan Chandrasekaran, chairman of Tata Sons Ltd., the holding company in an expansive business empire that includes Tata Motors Ltd. “Auto is a core business for us. From revenue terms, auto is our largest company.”
Tata Motors bought the maker of the Jaguar XE sedan and Land Rover Discovery sport utility vehicle from Ford Motor Co. in 2008. After turning it into a cash cow with booming sales in countries like Russia and China, JLR waned to such an extent that it’s had to launch a 2.5 billion-pound ($3.2 billion) savings program and slash thousands of jobs worldwide.
Losses at Tata’s automotive business have mounted with a slump in India’s car market, as well as trouble overseas, including an economic slowdown in China, where auto sales are sliding, and uncertainty over Brexit. JLR is closing its U.K. factories for a week in November to guard against disruption to supply chains from a possible no-deal Brexit.
Chandrasekaran said China sales have “collapsed” with a 50% drop last year, though 2019 is showing some improvement. Some problems were self-inflicted, including vehicle quality and dealer issues, he said, noting that the auto industry is “going through difficult times.”
“Getting the right portfolio, which one we invest in for electric vehicles, and how do we cut cost” are issues that need to be resolved, he said.
In an interview with Bloomberg Television earlier Tuesday, Chandrasekaran said dealing with tariffs is the “new normal” for the global auto industry and that negotiations around Britain’s exit from the European Union have taken too long. “Sometimes it’s better to have clarity than a desirable result,” he said. “Nations are getting more protective.”
The troubles of JLR are bogging down the Tata group as a whole, with Tata Motors writing down its investment in the British brands earlier this year by $3.9 billion. The salt-to-software conglomerate is among India’s most indebted, and the slump in the auto market is hitting both Tata Motors and Tata Steel, the nation’s biggest maker of the alloy.
Analysts at Sanford C. Bernstein last month described JLR as “severely challenged” and said Tata Motors should look at BMW AG as a buyer because the German company is “awash with cash.” Tata has previously denied reports it is looking at strategic options for JLR, including a possible stake sale.
While the company would “always look for partnerships,” it doesn’t want deals where “we just sell a stake and we have no say,” Chandrasekaran said Tuesday in New York. “We are not financial investors, Tata Group, we run companies. I’m not a Blackstone, I’m not a KKR.”
JLR’s capital expenditure has outpaced operating cash flow over the past two years, but Chandrasekaran said his target is to reverse that trend by 2021. “Once we do that, then people will believe what I’m saying: I’m not running away.”
--With assistance from Scarlet Fu, Caroline Hyde and Sam Nagarajan.
To contact the reporters on this story: Craig Trudell in New York at email@example.com;Gabrielle Coppola in New York at firstname.lastname@example.org;Anurag Kotoky in New Delhi at email@example.com
To contact the editors responsible for this story: Craig Trudell at firstname.lastname@example.org, ;Young-Sam Cho at email@example.com, Will Davies, Chester Dawson
©2019 Bloomberg L.P.