Tata Motors must sort out labour issues at the JLR plants

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Updated: November 24, 2014 2:16:29 AM

The contribution of Tata Motors’ domestic business to the company’s consolidated earnings...

The contribution of Tata Motors’ domestic business to the company’s consolidated earnings is becoming increasingly insignificant, with British carmaker Jaguar Land Rover (JLR) contributing a greater share with each passing quarter.

In this context, it isn’t difficult to understand why any potential disruption of production at JLR, arising from ongoing differences between the management and workers at the company’s five plants in the UK, could prove to be disastrous for the company.

On November 13, Unite—Britain’s largest union—issued a statement in which it said that its members, who comprise an overwhelming majority of JLR’s workers, had unanimously rejected the company’s pay offer and pension changes through a consultative ballot. “JLR was urged to get back around the negotiating table or face industrial action ballot,” Unite’s statement said.

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Tata Motors’ standalone India business contributed just 14.4% to Tata Motors’ overall turnover in the September quarter, for which it announced earnings on November 14, around half of what it contributed in percentage terms in the September 2013 quarter. In the July-September 2012 period, the domestic business contributed a much higher 35.8% to the Tata Group firm’s topline.

Tata Motors reported a 7% year-on-year decline in consolidated net profit at R3,291 crore for the quarter ended September 30. The carmaker’s consolidated net revenue grew 6.5% during the same period to R60,564 crore.

As has been the trend, Tata Motors’ domestic business disappointed once again in the September quarter despite a recovery in the commercial vehicles business. Losses from the standalone India business widened to R1,846 crore in the September quarter from R804 crore a year ago. The company’s passenger vehicles business continued to perform poorly despite the recent launch of the entry-level sedan Zest.

On the other hand, JLR continued to put up a stellar show. Sales revenue in the quarter ended September 30 grew by 4.2% year-on-year to £4808m, and operating profit margin rose 90 basis points over the year earlier to 19.4%.

Emerging geographies such as South America, China and Russia are expected to drive revenues going forward. New launches, variants and facelifts, along with capacity expansion (including commissioning of the joint venture with Cherry Automobiles in China) is expected to provide a boost to the luxury carmaker’s volumes going forward.

JLR accounted for over 90% of the group’s operating profit in FY14, a year when the company saw consolidated profits rise 43% to R14,104 crore.

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