908M94

TATA MOTORS’ ACQUISITION OF DAEWOO COMMERCIAL VEHICLE

COMPANY

Sanjay Singh, Meera Harish and Kulwant Singh wrote this case solely to provide material for class discussion. The authors do not
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Copyright © 2008, Richard Ivey School of Business Foundation Version: (A) 2017-05-03

This year we will also be focussing on expanding our business internationally. This will
demand that our products and services are globally competitive and that our enterprises
operate to international standards in terms of quality and customer service. We will need
to be extremely aggressive in the marketplace and much more proactive than we have
been in the past in order to be leaders in our fields of business. We need a change of
mindsets that break with past tradition in welcoming rather than resisting change.

– Ratan Tata, chairman, Tata Group, January 20041

In February 2004, Tata Group’s truck and car manufacturing unit, Tata Motors (TM), announced the
acquisition of Daewoo Commercial Vehicle Company (DCVC) in South Korea. The US$102 million deal
was the first major overseas acquisition by an Indian automobile firm.

News of the acquisition was met by a resounding silence, reflecting widespread puzzlement and the
transaction’s unprecedented nature: a little known, largely domestic Indian firm had acquired a leading,
established South Korean firm. The acquisition raised many questions: Why did TM acquire DCVC?
Could an Indian conglomerate with limited international experience succeed in a difficult and competitive
business by buying a failed subsidiary of a bankrupt Korean conglomerate? What was TM’s strategy for
succeeding with DCVC?”

THE TRUCK INDUSTRY

Trucks were classified into three categories, primarily by their gross weight. Light trucks were typically
about the size of a car and had a total weight of less than six tons. Medium trucks had gross weights

1
All quotations in this case were obtained from personal interviews or from material supplied by Tata Motors.

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between six and 15 tons, and heavy trucks had a total weight of more than 15 tons. The truck industry was
defined as comprising manufacturers of medium and heavy trucks. Some truck firms also built buses,
which used the same chassis, engines and other components as trucks. Light trucks were treated as separate
from the heavy trucks industry because they differed significantly in terms of customers, the nature of
competition and the competencies required to succeed.

The 1990s saw a wave of consolidation in the trucks industry, as major players acquired regional and
national brands, resulting in the dominance of a few large players. By 2004, the DaimlerChrysler group,
comprising Mercedes, Freightliner, Sterling and other brands, was the largest truck manufacturer in the
world, with annual sales of approximately 420,000 units and a presence in most major markets. Other
leading truck manufacturers included Volvo Trucks (including the acquired Renault and Mack truck
divisions), Scania of Sweden and Paccar (comprising the Peterbilt, Kenworth, DAF and Leyland divisions)
from the United States, though all had fewer unit sales than DaimlerChrysler. Two Chinese groups (Jie
Fang and DongFeng) had large volumes but little presence outside China.

The most costly components of a truck were the drive train (comprising the engine, transmission and
gearbox), axles, chassis and cab body. Substantial economies of scale could be achieved in the
manufacture of these components, because they were common to particular classes of trucks; however,
local or regional manufacture of truck bodies and cabs was encouraged by regulations, customer
preferences, and specialized uses, which offered relatively few economies of scale. Most firms therefore
concentrated on producing the drive train and other major components at a few locations globally. In
general, truck manufacturing required more customization and less mass production than car
manufacturing. The trucking industry was thus regarded as a local or regional industry rather than a global
industry.

Many trucks were sold fully manufactured, though a significant number were built to the custom
specifications of large buyers. Individual owners and operators of trucks were an important segment,
though fleet operators accounted for a majority share in many markets. The availability of distribution and
maintenance networks for trucks were important considerations for most buyers.

The quality and price of a truck was largely determined by its engine capacity, its reliability and the cost of
maintenance over the life cycle of the truck. Most medium and heavy trucks used heavy-duty diesel
engines, which comprised as much as 30 per cent of a truck’s cost. However, because of the low volumes
and the heavy investments required for engine manufacturing, most truck manufacturers purchased engines
from specialist manufacturers.

Demand for trucks was primarily driven by economic growth and investments in physical infrastructure.
Since the 1960s, the trend toward trucking (in place of using railways) had increased demand significantly.
Most developed markets had a stable demand for trucks in the 1990s, and future growth was expected in
the emerging economies, particularly in Asia. Exhibit 1 shows the relationship between road development
and demand for trucks across countries.

TATA GROUP

Founded in 1868 as a trading firm, the Tata Group had become India’s largest and most profitable
conglomerate by the mid-20th century. The Tata Group played an important role in the development of the
Indian economy, was a key player in most industrial sectors and was widely respected for its ethical
principles, effective management and business acumen.

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India’s economic reforms in the 1990s saw gradual liberalization, privatization, increased competition and
movement away from a socialist model. The result was a substantial increase in growth rates, with India
emerging by 2002 as the fastest-growing large economy in the world after China. However, the new
economic environment of reduced government protection and increased local and foreign competition
threatened many Indian businesses.

The Tata Group launched a major restructuring and renewal effort from the mid-1990s, which saw rapid
turnaround in many of its poorer businesses. For example, the information technology (IT), hotel and steel
operations achieved global industry-leading standards. Tata Steel’s turnaround illustrated the change in the
Tata Group’s fortunes. Tata Steel reformed itself from one of the least efficient producers of steel in the
early 1990s to the world’s lowest-cost producer of steel by 2005, which earned it first place in an industry
listing of World Class Steel Makers.

In 2004, the Tata Group’s major businesses were vehicles, chemicals, engineering, hotels, IT, power, steel,
telecommunications and tea. The Tata Group comprised 93 firms, including 29 subsidiaries that were listed
in India and, in a few cases, in the United States. Tata Group’s revenue was US$17.8 billion, more than
two per cent of India’s gross domestic product (GDP). The Tata Group had operations in 40 countries, and
its products and services were available in 120 countries. Foreign sales accounted for approximately 26 per
cent of turnover.

Tata’s global ambitions were signaled by its US$450 million acquisition of Tetley Teas of the United
Kingdom in 2000. This transaction was the largest overseas acquisition ever by an Indian firm and
established the Tata Group as the second-largest tea firm in the world. In 2003, Tata Group formalized a
globalization strategy and established a mergers and acquisitions (M&A) group to identify possible
acquisition targets.

TATA MOTORS

Tata Motors (TM) was established in 1945 as an engineering and locomotive firm. It launched its first
medium truck in 1954, in collaboration with Daimler Benz. This collaboration ended in 1969, but updated
versions of the truck continued to sell well in India, particularly because there was limited competition.
DaimlerChrysler owned seven per cent of TM in 2006.

In the 1980s and 1990s, TM introduced a series of new trucks, specialized vehicles, buses and earth-
moving equipment. It commenced manufacturing heavy trucks in 1983 and light trucks in 1985. A joint
venture with Cummins Engines of the United States was established in 1993 to manufacture diesel engines
in India. TM gradually shifted its focus from manufacturing the chassis to manufacturing complete
vehicles. Over time, this focus resulted in the firm becoming one of the largest manufacturers of medium
trucks in the world.

In 1995, TM launched its first major effort to develop a car using a wholly indigenous design. Many
predicted the failure of the project because the firm faced strong global competitors and had no prior
experience in car design and manufacturing. Reflecting its cost orientation, TM acquired an unused Nissan
plant in Australia for US$20 million and shipped it to India. The plant included 21 robots and was
estimated to have originally cost more than US$65 million to build.

In 1998, TM launched a new car model, the Indica, which had been developed in one-third of the
development time and costs considered to be global standards. A revamped Indica model achieved a 20 per

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cent market share and sales of more than one million units within three years of its launch. The Indica was
exported to several countries and sold under the Rover brand in the United Kingdom. Exhibit 2 provides
financial information for Tata Motors.

By 2003, TM was the largest manufacturer of medium and heavy commercial vehicles in India, with a
market share of 60 per cent and quarterly sales of approximately 40,000 trucks. TM offered more than 100
models of light and medium trucks, buses, special purpose vehicles, off-road vehicles and defense vehicles.
All of these vehicles utilized engines of up to 210 horsepower (hp). The firm was viewed as having the
ability to develop reliable, though not technologically advanced, trucks at relatively low cost using its in-
house technological capabilities.

TM invested approximately two per cent of its annual turnover on research and development (R&D),
which focused on new product development and technology upgrading. In 2003, TM launched a costly
“World Truck” program, which aimed to introduce a full range of new trucks by 2008. These trucks would
meet both the rising demands of local customers and the quality, power and emission standards of world-
leading trucks.

India’s growing economy resulted in the trucks market growing by 30 per cent annually after 2002. With
the government focusing on a program of highway and other infrastructure construction, the heavy truck
segment, in particular, was expected to grow significantly. In 2005, India’s trucks and bus market of US$5
billion was the fifth-largest in the world. However, growth was expected to slow down to about 10 per cent
annually in the medium term. This growth attracted new entrants, with both Volvo and Iveco entering with
heavy trucks and talk of DaimlerChrysler, Scania and other manufacturers considering future entry.
Exhibits 3 and 4 provide data on the Indian truck segment.

Despite growing into the largest firm within Tata Group, TM’s success was largely domestic, with foreign
sales accounting for only five per cent of total revenue in 2003. In 2004, TM established the goal of
generating 25 per cent of its revenue from foreign sources by 2007. Three key markets were identified:
China, Latin America and Western Europe. In line with this orientation, TM became the first Indian
vehicle manufacturer to be listed on the New York Stock Exchange in September 2004.

DAEWOO COMMERCIAL VEHICLES COMPANY

Formed in 1967 as a textile firm, Daewoo Corporation (Daewoo) had grown to become South Korea’s
second-largest business group by 1997. Daewoo was highly diversified and, by the mid-1990s, had sales in
excess of US$50 billion. Daewoo’s rapid growth since its founding had been driven by heavy investments
supported by large borrowing and by government protection within the growing South Korean economy.
However, the major economic crisis that struck much of East Asia in 1997 caused many of Daewoo’s
businesses to collapse and led to the firm’s bankruptcy in 1999, as a result of debts of US$80 billion.

Daewoo Motors had been established in 1982 through an acquisition. By the mid-1990s, it emerged as
South Korea’s second-largest automobile and truck manufacturer, accounting for 30 per cent of Daewoo’s
group sales. The group’s bankruptcy and a 56 per cent drop in car sales in Korea following the 1997 crisis
led to Daewoo Motors’ bankruptcy in November 2000. Daewoo Motors’ car operations were then sold to
General Motors in November 2002, resulting in the creation of Daewoo Commercial Vehicles Company
(DCVC) to house its remaining bus and truck operations. The bus arm was sold to a Korean firm that was
the world’s largest manufacturer of hats, leaving only the truck subsidiary.

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DCVC had an installed capacity of 20,000 trucks a year from a state-of-the-art plant completed in 1995.
Approximately 75 per cent of DCVC’s 800 plant workers had completed six months of training in Japan
and were viewed as having been very well-trained. The firm was regarded as having good assembly and
integration skills for the manufacture of high-end heavy trucks, but offered limited sales and service
support within Korea. DCVC produced more than 90 truck models, across the cargo, dump, mixer and
tractor category, with most using Cummins diesel engines in the 210 hp to 400 hp range. Between 1999
and 2003, total production remained stable at between 4,000 and 5,000 units per year, though market share
declined slowly.

The truck market in Korea declined after 1997, with unit sales falling in each subsequent year. Three local
firms exited the industry, leaving Hyundai Motor Company’s truck subsidiary and DCVC as the only local
manufacturers in the market. Hyundai was the dominant firm in heavy trucks with about 60 per cent of the
market and was the only provider of medium trucks in Korea. European firms Volvo, Mercedes Benz,
Scania and MAN offered high-end products, but had great difficulty achieving substantial sales, and
collectively accounted for less than 20 per cent of the market.

DCVC appeared to have recovered from the crisis by 2003, after suffering losses in the two previous years.
It was profitable on an operating basis, and with sales of about 4,000 units, had the second-largest market
share of 26 per cent in the heavy trucks segment in Korea. About 10 per cent of output was exported,
mostly to related Daewoo Group firms operating abroad. Exhibit 5 provides financial information on
DCVC. Exhibit 6 provides product information for DCVC and TM.

In 2003, DCVC’s models were dated, reflecting a lack of investments since the 1997 crisis. Thus, the
company commenced a US$50 million program to introduce an entirely new product line by 2008. DCVC
was also working on introducing its first medium truck in 2006.

THE ACQUISITION

On July 14, 2003, TM was informed that DCVC was available for sale. Although TM had not considered
an acquisition in Korea, it decided to investigate the possibility as an exercise for its newly formed M&A
group. After initial investigations suggested a promising acquisition, TM decided on July 26 to submit a
bid and, on July 30, submitted a request for additional information, which it received on August 4. TM
submitted its non-binding bid on August 14, 2003.

Ravi Kant, then TM’s chairman and executive director, explained his interest in acquiring DCVC:

Truck manufacturing, particularly of medium and heavy trucks, is a cyclical business. The
larger the market share of a company, the more severe is the cyclical impact; also the more
liberal the markets, the more pronounced is the cyclical impact. The only saving grace in
this business is the cyclical phase lag across different geographies. Spreading our business
to different countries will act as a hedge against cyclical trends because when the domestic
CV business is in a slump, things will be looking up elsewhere. The complementary
product range of the two companies and their strengths in product development and
international marketing will open new opportunities for both. We are excited at the
possibilities of this cooperation.

Kant also indicated that acquiring DCVC would allow TM to save up to two years and considerable costs
in the development of its “World Truck” program. TM had commenced design, styling and development

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work on the World Truck, but DCVC’s large truck models, blueprints and its new truck project would
reduce development time and mitigate financial and marketing risks.

On August 14, 2003, the same day it submitted its bid, TM was selected as one of 10 firms short-listed
from 15 bidders. Among these bidders were financial investors, Korean auto component manufacturers,
and unnamed European and Chinese commercial vehicle manufacturers.

On August 27, 2003, Kant led a due diligence team to DCVC’s headquarters in Gunsan, South Korea. The
TM team comprised operations, marketing, human resources (HR) and IT managers, rather than only the
financial staff typical of acquisition teams. This team composition was a deliberate strategy to ensure that
the acquisition decision was driven primarily by business issues and by the people likely to run the firm if
the acquisition succeeded. TM engaged the services of a local law firm and international accountants for
financial and investment advice. Ravi Kant decided, however, not to utilize M&A consultants, believing it
necessary for his team to drive the acquisition.

While waiting for his initial meeting with senior management on the first day of his visit, Kant asked a
middle manager serving as a translator what outcome DCVC employees hoped to see. This manager
indicated a preference to be acquired by a European firm with the technological and financial resources
that DCVC required. Supporting this preference, the TM team had noticed a difference in the hospitality
provided: they had been booked into a rundown tourist hotel, whereas the European teams had been
accommodated at Gunsan’s best hotel. These events crystallized the challenge for Kant:

To me, this was the turning point in the deal. I realised it was not about bidding high. I
immediately decided that the challenge was as much about selling and marketing Tata
Group and TM to the Koreans as it was to buy DCVC. Even if we bought the company, it
would not work out unless they accepted us. We were buying the company but, at the
same time, we were selling ourselves. Clinching the deal was about winning the
confidence of the Korean managers and unions. Unless there was a two-way process, the
acquisition would not work.

Kant and his team launched a structured program to educate DCVC about India and the Tata Group. While
part of the team conducted financial due diligence, the others focused on the non-financial aspects of the
deal, particularly on communicating with DCVC. TM translated all of its bid and company material into
Korean and produced a Korean DVD on the company. This material, which was made available within 72
hours, surprising DCVC’s management, may have been critical: DCVC’s president later indicated that
despite his firm having a small joint venture in India, he had not previously heard of either TM or the Tata
Group.

The TM team quickly detected that DCVC had a much more hierarchical structure than TM. R.S. Thakur,
TM’s vice-president of finance, decided that the due diligence team and the due diligence process would
take great care to avoid breaching this hierarchy. As a result, he personally managed all communications
during the due diligence process, to ensure that senior managers were not undermined by direct
communications with their subordinates. TM made presentations in Korean, to management, unions, trade
and industry associations, distributors, the governor, the mayor, various ministries and the prime minister
and president of Korea.

TM’s communications focused on two key messages. The first message was that TM had good
connectivity globally, and its partnerships with leading truck and automotive companies provided access to
technology. This message was reinforced by TM’s position as the sixth-largest commercial vehicle

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manufacturer in the world and the fact that it manufactured its own key components, such as engines, axles
and gearboxes.

The second message was that Tata was not an ordinary firm. Tata Group’s ownership structure, its
management concept and its reputation for ethical management and good corporate governance were
strongly emphasized. It also had strong labor relations and was viewed as an exemplary employer. Tata’s
trustee ownership, which had seen the founding family give away a majority of its ownership to charities,
attracted considerable attention. The Korean government had been grappling with the issue of corporate
governance for family-owned conglomerates, such as Daewoo. The idea that an Indian family business
could implement good governance and ethical practices and achieve long-term success therefore attracted
considerable attention. Kant used this point to emphasize that TM was looking beyond short-term financial
gain and was focused instead on making the acquisition work.

The TM team also visited customers and a transporters’ association to obtain information on DCVC’s
trucks from drivers and operators, who expressed widespread surprise that executives from a truck
manufacturer wished to hear their opinion. The president of the transporters’ association insisted on
hosting the TM team to dinner in appreciation, noting that: “No existing company management has
bothered to ask me how I feel or what I want. And here you are doing so even before taking over the
business.”

Recognizing the strong work ethic in Korea, the TM due diligence team made an effort to demonstrate its
own strong culture to DCVC employees. One unexpected outcome of its relatively small due diligence
team was the long hours put in, even during weekends. These long hours attracted praise from some
Korean workers that the TM team was “more hard-working than Koreans.”

The TM team visited foreign buyers of other Korean firms, of which there had been relatively few. A
consistent view was that Korean workers were very passionate and that if the acquisition were handled
correctly, TM could count on the strong support of DCVC’s management and employees. This view
helped to convince the TM team to agree to union demands that no Tata Daewoo Commercial Vehicles
(TDCV) workers would be laid off in the first three years after the acquisition.

Foreign bidders appeared to have considerable concern regarding the difficulty of managing a Korean
acquisition, and the potential of union disruption raised particular concern. At least one bidder pulled out
over apprehension about Korea’s militant union. Kant felt that his team’s strong communications efforts
were effective in gaining support for TM and played a key role in the acquisition; what had been initial
resistance had changed to increasing support for TM:

The whole situation in the company had changed and these very people who were rather
skeptical of us became very emotional and told our people that if the company was to be
sold to anybody, it must go to Tata.

After a detailed study, the TM team concluded that the other bidders would not be able to derive the full
value of DCVC and, therefore, were unlikely to make high bids. Thus, TM submitted a conservatively
priced bid at the lower end of its internal pricing range. TM was also confident about the financial health of
DCVC, as the bankruptcy process had forced creditors to take significant write-downs. DCVC had also
undertaken extensive restructuring and had initiated some layoffs. Thakur described DCVC’s balance sheet
as being “as clean as any can be.”

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The quality of DCVC’s assets had also become clear to the TM team. The DCVC plant had been designed
and equipped to very high standards and, as a result of being underutilized, was in very good condition.
TM’s managers were so impressed with the quality of the plant and the prospective purchase price that
they “struggled to hide their excitement” during a plant visit. The team also concluded that TM could save
up to two years and a major portion of DCVC’s product development costs by merging its World Truck
and DCVC’s trucks development programs.

On October 22, 2003, TM was selected as the preferred bidder for DCVC. During its final investigations,
the TM team discovered and enforced several sales contracts, which resulted in a further five per cent
reduction in the final price. In acquiring DCVC, TM accepted responsibility for some liabilities and
provisions against severance pay for employees. The final price for DCVC was $102 million, considerably
less the $230 million value of previous estimates. The deal, agreed to in February 2004 and completed in
March 2004, was viewed as the fastest major acquisition undertaken in South Korea.

TM used US$51 million of its own funds and borrowed US$51 million against the assets of DCVC, which
were valued at US$29 million. In addition, TM received the US$36 million that DCVC had in liquid assets
and certificates of deposits that had been held in security as part of the bankruptcy process. TM also gained
the right to the Daewoo name, though buyers of other Daewoo companies also had that right.

Despite initial apprehension at being acquired by a firm from India, DCVC’s court-appointed manager,
Chae Kwang-Ok, was optimistic:

We expect a lot of synergy from Tata’s acquisition of our company. It will help [the
company] increase competitiveness by strengthening the research and development and
after-sales service sectors. With this deal, Daewoo Commercial is expected to have
product competitiveness.

The other key factor for the TM team to continue negotiation was the strong support provided by its
chairman, Ratan Tata. On occasions when the team could not decide how to move forward, Ratan Tata’s
advice to focus on the main objectives kept the deal on track.

Media reports speculated on the reasons for TM’s acquisition. One suggestion was that DCVC’s
technology and plant were key attractions for TM. TM would also learn from operating in the highly
quality-sensitive Korean market, which was often used as a test market by leading manufacturers. Another
explanation was that TM wished to expand its product range. Other observers speculated that DCVC
would help TM sell its trucks in Korea, which was dominated by a local firm, Hyundai. A related view was
that DCVC’s Korean image and Korea’s proximity to China would help TM break into China’s large and
rapidly growing market. Yet others speculated that Daewoo’s superior brand name was the key attraction
for TM.

THE SITUATION IN 2006

In February 2005, TM announced the acquisition of a 21 per cent stake in the troubled Spanish bus
manufacturer Hispano Carrocera (HC), with an option to make a full purchase within five years. TM
explained the acquisition as providing access to HC’s product development abilities, its manufacturing
plants in Spain and Morocco, design and technology, branding rights, a 25 per cent market share of the bus
market in Spain and access to the European market. This explanation appeared to suggest that the
acquisition of DCVC was the first step toward fulfilling this vision; however, Kant was quick to demur:

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We are not in the acquisition business! We were offering Hispano Carrocera and DCVC a
chance to be something that they could not otherwise be. We offered them our canvas to
paint on, to use our broader reach to make their firm what they wanted it to be.

In 2005, DCVC launched a new range of medium trucks, its first major product launch in a decade and the
first time the firm had offered products outside the heavy truck segment. Initial sales were low, as the truck
had been developed and launched with almost no feedback from customers. The firm faced the challenge
of entering a market monopolized by Hyundai, the only provider of medium trucks in Korea. The medium
truck launch was critical for increasing plant utilization, which in turn was important for long-term
viability and profitability. TM set a target of raising utilization of DCVC’s plant to 60 per cent of its
20,000-unit capacity. TM also launched a new assembly facility in India for DCVC’s Novus truck.

In 2004, exports doubled, from less than 400 units in 2003, and grew even more rapidly the following year.
The almost 2,500 vehicles exported in 2005 accounted for about 66 per cent of total heavy truck exports
from Korea. Primary markets were South Africa and the Middle East, where TM had strong sales and
service networks. The combination of TM and DCVC created the fifth-largest manufacturer of medium
and heavy trucks in the world. DCVC’s revenue in 2005 had risen to US$343 million, and its profits had
risen to US$16.8 million. No signs of union unrest were apparent, and reports in Korea suggested that
Daewoo’s transfer to a new owner had been almost painless.

TM’s acquisition was widely hailed as a great success and a model for future acquisitions. Kant attributed
the success to TM’s focus:

not on the acquisition as much, as on the post-acquisition. I think that made a lot of
difference to thinking because normally what happens is a focus on the acquisition itself.
We tried to take a longer term view by focusing on what things would be required post-
acquisition. And we started doing these from day zero.

Satish Pradhan, executive vice-president of Tata Group, had a different explanation, attributing the success
instead to the skills of the acquisition team:

The acute sensitivity of the people, like Mr. Ravi Kant, that went there keeping the
antenna tuned into what will help them run this business successfully. And listening and
amplifying the weak signals, like being told that DCVC doesn’t want you to be there —
had that been ignored or not heard, it would have been a different story. They were attuned
to those weak signals, picked them up and amplified them.

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Exhibit 1

ROAD DEVELOPMENT AND TRUCK DEMAND IN SELECT COUNTRIES

1000
Truck penetration MHCV/ m population

Germany
800
UK
France
600
Turkey
Spain
Australia
400 Russia Portugal
Argentina
Brazil
200 China
South Africa
Indonesia
India
0
0.0 0.4 0.8 1.2 1.6 2.0

Road density = Paved highway (km)/Area (sq km)

Truck Penetration MHCV/ M population.

Source: TM presentation.
Note: MHCF: medium and heavy commercial vehicles; m population: one million people.

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Exhibit 2

TATA MOTORS’ INCOME STATEMENT (US$MILLION)

2005 2004 2003 2002 2001 2000 1999 1998 1997

Cash and bank balance 459.15 174.90 51.52 66.96 24.71 14.95 103.86 111.10 59.18
Receivables 818.34 405.91 351.03 294.27 331.95 450.34 735.08 686.76 934.98
Inventories 366.71 260.47 243.45 202.44 236.49 226.91 201.19 244.39 317.79
Net fixed assets 820.82 732.94 707.10 712.71 817.72 911.37 949.37 871.06 741.93
Investments 686.40 716.66 272.83 244.21 301.72 276.83 241.90 211.79 229.79
Deferred tax, intangibles, 53.36 40.01 121.95 145.52 191.40 181.26 174.01 136.80 107.04

Total loans 571.45 285.97 306.25 472.52 641.76 687.98 809.63 837.11 705.33
Foreign loans (part of total loans) 509.34 163.79 104.23 116.60 134.61 172.88 243.37 286.81 57.87
Current liabilities & provisions 1,538.86 1,082.67 758.67 562.56 565.91 513.99 711.96 474.73 671.35
Deferred tax liabilities 152.97 147.37 137.19 125.70 0.00 0.00 0.00 0.00 0.00
Income Statement 2005 2004 2003 2002 2001 2000 1999 1998 1997
Sales 4,731.49 3,535.54 2,279.42 1,814.25 1,743.36 2,036.43 1,559.30 1,884.79 2,800.16
Components & material costs 2,804.17 1,947.23 1,238.93 1,000.78 1,045.57 1,211.64 886.45 1,077.07 1,697.48
Wages & salaries 238.01 200.33 151.28 141.79 130.14 160.82 163.30 154.17 185.89
Marketing & Advertising 93.71 73.03 83.58 62.57 44.05 20.39 13.35 12.47 13.71
Miscellaneous expenses 194.85 150.98 80.29 38.13 59.06 77.40 80.97 75.52 76.47
Indirect taxes 708.12 520.39 371.37 288.36 282.23 346.67 222.08 251.74 336.25
Profit (EBITDA) 535.15 431.63 250.62 149.31 73.03 211.67 192.63 253.25 412.15
Interest 17.57 20.65 44.99 77.17 102.56 104.19 100.65 103.62 73.91
Tax provision 95.15 109.54 44.22 0.25 0.27 1.18 2.48 8.64 66.19
Depreciation 103.09 86.85 76.05 72.71 74.34 79.13 65.96 65.45 57.82
Net Profit 283.26 183.95 63.02 -11.01 -107.07 16.30 22.99 74.55 211.94
Others 2005 2004 2003 2002 2001 2000 1999 1998 1997
Cash from operations - 563.50 220.14 84.25 n.a. n.a. 291.81 182.07 -227.01
Net cash flow 282.57 119.21 -17.07 43.29 n.a. n.a. 1.37 54.07 44.57
Net margin 0.061 0.053 0.028 -0.006 -0.063 0.008 0.015 0.040 0.077
Source: TM Annual reports (Financial years ending March 31).

This document is authorized for use only in Prof. Ashutosh Kumar Sinha's MDP/209/23/EPAF-3/2013 at Indian Institute of Management - Lucknow from Oct 2023 to Mar 2024.
 Page 12 9B08M094

Exhibit 3

COMMERCIAL VEHICLES DEMAND IN INDIA

Source: TM presentation.
Note: LCV: Light commercial vehicles; MHCV: medium and heavy commercial vehicles.

This document is authorized for use only in Prof. Ashutosh Kumar Sinha's MDP/209/23/EPAF-3/2013 at Indian Institute of Management - Lucknow from Oct 2023 to Mar 2024.
 Page 13 9B08M094

Exhibit 4

PRODUCTION AND SALES OF TRUCKS IN INDIA

Year 2002 2003 2004

Production Sales Production Sales Production Sales
Ashok Leyland 29,688 29,142 49,123 48,471 54,519 54,734
Bajaj Tempo 5,791 5,516 8,182 8,239 6,591 6,346
Eicher Motors 12,796 13,075 16,008 15,605 23,014 23,021
Hind Motors 1,483 1,548 607 689 456 476
Mahindra 24,610 24,287 30,559 30,306 42,091 40,780
Swaraj Mazda 8,201 8,207 10,225 10,292 12,445 12,446
TM 107,784 104,543 159,855 163,109 209,909 209,594
Tatra Udyog 18 18 130 132 165 224
Volvo India 0 0 381 402 843 789
Total 190,443 186,416 275,071 277,257 350,033 348,422
Other markets:
Global total 5,900, 000 5,700,000 6,100,000
China 417,000 398,000 542,000
Japan 170,000 240,000 254,000
S. Korea 31,000 31,000 26,000

Source: For Indian data: Society of Indian Auto Manufacturers. For non-Indian data: Euromonitor.
All figures are in units. Sales include exports, and may exceed production due to unsold stock from previous years.

This document is authorized for use only in Prof. Ashutosh Kumar Sinha's MDP/209/23/EPAF-3/2013 at Indian Institute of Management - Lucknow from Oct 2023 to Mar 2024.
 Page 14 9B08M094

Exhibit 5

DAEWOO COMMERCIAL VEHICLES COMPANY INCOME STATEMENT (US$MILLION)

2004-05 2005-06
Gross Revenue 285.36 373.95
Cost of Sales 249.59 313.61
Gross Profit 35.77 60.34

Selling & General Expenses 28.92 41.16

Operating Income 6.85 19.18
Other Income/ (Expense) 0.15 0.80
Ordinary Income 6.71 18.38

Net Extra-ordinary Gain / (Loss)

Income (loss) before Tax 6.71 18.38
Income Tax Expense 1.71 4.59

Net Income/ (Loss) 5.0 13.79

Cash and Cash Equivalent 10.32 24.10

Short-term Investments 2.28 1.54
Current Account and Notes Receivables 68.27 89.49
Inventory 48.92 38.55
Other Current Assets 3.8 3.65
Total Current Assets 133.59 157.32
Long-term Investments 1.17 1.47
Property Plant and Equipment 122.27 130.81
Intangible Assets 0.40 0.85
Total Assets 257.44 290.45

Current Account and Notes Payables 45.78 58.23

Short-term Borrowing 0.00 10.00
Deferred Tax Liability
Other Current Liabilities 6.36 8.42
Total Current Liabilities 52.13 76.66
Long-term Borrowings 30.00 10.00
Other Long-term Liabilities 19.41 26.38
Total Long-term Liabilities 49.41 36.38
Retained Earnings and Capital Surplus 139.95 146.89
Reserve for Human Resource Development 1.23 15.07
Common Stock 14.72 15.45
Total Liabilities and Shareholders’ Equity 257.44 290.45
Source: Tata Motors.

This document is authorized for use only in Prof. Ashutosh Kumar Sinha's MDP/209/23/EPAF-3/2013 at Indian Institute of Management - Lucknow from Oct 2023 to Mar 2024.
 Page 15 9B08M094

Exhibit 6

PRODUCTS OF DAEWOO COMMERCIAL VEHICLES COMPANY AND TATA MOTORS

Daewoo Commercial Tata Motors

Vehicles Company
Production Capacity 20,000 units 140,000 units
Units Sold (2005/06) 5,734 135,337
Units Sold (2004/05) 4,540 107,694
Major Markets South Korea India
Percentage 43% 10%
Exported(2005/06)
Product Range (gross Heavy trucks Light and medium trucks
vehicle weight) (15 to 45 tons) (2 to 40 tons)
Engine Types 210 to 420 hp 50 to 210 hp
Engine Source Doosan Infracore Company, In-house, through joint
Cummins venture with Cummins
Major Drive Train Sourced externally Internal manufacture
Components

Source: Tata Motors.

This document is authorized for use only in Prof. Ashutosh Kumar Sinha's MDP/209/23/EPAF-3/2013 at Indian Institute of Management - Lucknow from Oct 2023 to Mar 2024.