Tata Profits Fall on Higher Costs
July 30, 2008
India's Tata Motors, which recently completed the $2.4-billion purchase of Jaguar and Land
Rover from Ford, reported a 30 percent decline in earnings in the quarter that ended June 30. It was its largest quarterly profit decline in at least five years, Bloomberg News
reported.
Tata, due to introduce its $2,500 Nano this fall, blamed soaring raw material costs for the income drop, which had been predicted by analysts.
Tata earned $77 million in the quarter while revenues rose 14 percent and sales climbed 3.9 percent to 133,079 vehicles. However, Tata's raw material costs, its largest expense, soared 26 percent, mostly due to higher steel costs.
Tata competitor Mahindra & Mahindra Ltd. also reported Wednesday a decline of 17 percent in income. The SUV maker blamed foreign-exchanges losses for the decline, which was not anticipated by analysts.
In other Tata news, the Indian automaker revealed Tuesday that it no longer use Ford Credit for its retail and dealer financing. Instead, Fiat Group Automobiles Financial Services and France's Credit Agricole Group will take over that business for Tata.
The move is not surprising. Sources told AutoObserver at the Geneva Motor Show in March that Jaguar/Land Rover financing from Ford Credit likely would be quick to go when Tata completed the purchase as Ford Credit is a more expensive funding source than its competitors. That's even more true today than it was a few months ago with Ford Credit's borrowing costs increasing due to the credit crisis coupled with the troubled U.S. auto industry.
Photo by Tata
Tata Nano goes on sale this fall supposedly starting at $2,500.
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