Tata Motors - Crisis and Recovery

1157 WordsNov 23, 20095 Pages
TATA MOTORS Submitted to: R. Thankur Submitted by_:_ *Group 10* (FT-B*2*) Arpita Kharbanda (08FT-071) Hardik Semlani (08FT-079) Himanshu Goyal (08FT-081) Kanika Nagpal (08FT-082) Manasi Gupta (08FT-085) Table of Contents “It is our ability to anticipate the future, and react accordingly that will determine our success.” Henning Holck-Larsen {text:bookmark-start} Introduction {text:bookmark-end} Tata Motors Limited is India’s largest automobile company, with revenues of Rs. 35651.48 crores (USD 8.8 billion) in 2007-08. It is the leader in commercial vehicles in each segment, and among the top three in passenger vehicles with winning products in the compact, midsize car and utility vehicle segments. The…show more content…
However, growth post-1997 stagnated, as fixed and raw material costs spun out of control, and depreciation and amortisation charges started eating into the bottom line. The flashpoint came in March 2001. As costs continued to bloat, the commercial vehicles sector slipped into a vicious downcycle even as the fledgling car business got bogged down by teething problems. Result? A hole of Rs 500 crore in the P&L (profit and loss), the largest ever splash of red reported in the private sector. Investors were perplexed as the stock price crashed, and analysts and editors questioned Ratan Tata 's decision to make cars as well as Telco 's very survival. {text:bookmark-start} The Cause {text:bookmark-end} Till 2000, Tata Motors was predominantly a manufacturer of commercial vehicles, and that is a very cyclical business. At the time, Tata Motors was making huge investments in car manufacturing to move away from that cyclicality. But while the company was in the middle of this diversification, the commercial-vehicle market in India shrank by more than 40 percent, with massive consequences for both the top and, more particularly, the bottom lines of the company. The 5 billion rupee loss in 2001 was the first time something on this scale had happened in the company’s history, and it shook everybody within the organization. {text:bookmark-start} Recovery Strategy {text:bookmark-end} Tata Motors studied the situation tried to

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