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Accounting in Action

Tata Motors bought Jaguar Land Rover from Ford.  Please read the  article about the difficulty Tata is having with the brand.

Sales are down, big time. So cash flow is less.

Tata paid off a lot of the $3 billion but now needs to invest a billion a year in R and D.

Tata is asking for another 15 days to pay suppliers, and apparently is asking shareholders to loan it some money.

When will Jag become profitable investors ask?  Good question, Jag has long been a name marque since winning the Lemans road race in the early 1950s but this is 2009. Ford never made money with it and Tata is dreaming that it can 'take sales away from BMW.'  Every car company that aspires to sports sedan success believes that, none have succeeded thus far. I just remembered that BMW itself bought the Rover Car comp;any in England and  lost billions before throwing in the towel. No British Car Company is owned by a Brit.

There are many accounting terms in the article, and in particular an analysis of cash flow. We are studying cash flow in cost managerial now.

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One response to “Accounting in Action”

  1. Austin Kroll Avatar
    Austin Kroll

    As a fan of old Jags coming out of Coventry, I believe that Jaguar will be becoming increasingly a niche brand, much less mainstream as it is today. Historically, Jags have been expensive cars not only to own, but to maintain, as they are frequently being repaired due marginal quality of components. More on that momentarily. Thus, they had a limited customer base and produced limited amounts of cars. Ford tried to make Jag more accessible with that miserable car they called the X-type. Tragically, it was nothing more than a European Ford Mondeo with some nicer hardware. At the end of the day, it really wasn’t a Jag and they were cranking out more cars than ever at excruciating thin margins. Same goes for the S-Type. Take a Lincoln platform and components and invent a Jag to sell. Once again, a departure from what Jaguar is good at, that being a full-size saloon or couple/convertible sports car.
    Jaguar has always had to deal with with high cost of labor, since its headquarters is still in the UK where labor has a stronghold on manufacturers. BMW tried to run Jag/Land Rover as well and it was even too difficult for the Germans to handle. Labor is strong in the U.K. and they make doing business and producing a quality product very difficult. Once again, Big Labor proves that they are a terminal cancer to business. Tata thinks they can do it better. Ultimately, they will have build the “Cats” over in India, where labor is cheaper and one can demand more of the workforce in terms of quality. That will remain to be seen because they are continuing to turn-out all of their autos at their Coventry, England facility. It shall be interesting to watch unfold.

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