95
Notice
Directors’ Report
(69-103)
Management Discussion & Analysis
Corporate Governance
Secretarial Audit Report
prolonged delay in the Company’s operations related to these risks
could impact its results of operations.
Product liability, warranty and recall:
The Company is subject
to risks and costs associated with product liability, warranties and
recalls, should the Company supply defective products, parts,
or related after-sales services, including by generating negative
publicity, which may adversely affect the Company’s business, results
of operations and financial conditions. Such events also require the
Company, to expend considerable resources in correcting these
problems and could adversely affect the demand for the products.
The Company may also be subject to class actions or other large
scale product liability or other lawsuits in various jurisdictions where
it has a significant presence.
Jaguar Land Rover Pension obligations:
The Company provides
post-retirement and pension benefits to its employees, some of
which are defined benefit plans. The pension liabilities are generally
funded and the pension plan assets are particularly significant in
respect the JLR Pension plan. All new employees in the operations
from April 19, 2010, have joined a new defined contribution
pension plan.
Lower return on pension fund assets, changes in market conditions,
changes in interest rates, changes in inflation rates and adverse
changes in other critical actuarial assumptions, may impact its
pension liabilities and consequently increase funding requirements,
which will adversely affect the Company’s financial condition and
results of operations.
Automobile financing business and selling arrangements:
In
India the Company is subject to risks associated with its automobile
financing business carried out by its subsidiary Tata Motor Finance
Ltd. In order to support the sale of its vehicle. Any defaults by the
customers or inability to repay installments as due, could adversely
affect the Company’s business, results of operations and cash flows.
In addition, any downgrades in the Company’s credit ratings may
increase the borrowing costs and restrict the access to the debt
markets. Over time, and particularly in the event of any credit
rating downgrades, market volatility, market disruption, regulatory
changes or otherwise, the Company may need to reduce the
amount of financing receivables it originates, which could adversely
affect the ability to support the sale of vehicles.
Jaguar Land Rover has consumer finance arrangements in place
with local providers in a number of key markets. Any reduction in
the supply of available consumer financing for purchase of new
vehicles could create additional pressures to increase marketing
incentives in order to maintain demand for its vehicles, which could
materially and adversely affect the Company’s sales and results of
operations. Further, Jaguar Land Rover also offers residual value
guarantees on the leases of certain vehicles in some markets. Any
adverse movement in used car valuation could impact our result
of operations.
Labour unrest:
The Company’s permanent employees, other
than officers and managers, in India and most of the permanent
employees in South Korea and the United Kingdom, including
certain officers and managers, in relation to automotive business, are
members of labour unions and are covered by wage agreements,
where applicable with those labour unions.
In general, the Company considers labour relations with all of
employees to be good. However, in the future the Company may be
subject to labour unrest, which may delay or disrupt the operations
in the affected regions, including the acquisition of raw materials
and parts, the manufacture, sales and distribution of products and
the provision of services. If work stoppages or lock-outs at the
Company’s facilities or at the facilities of the major vendors occur or
continue for a long period of time, the business, financial condition
and results of operations may be adversely affected.
JLR operations in key mature market:
JLR, which contributes
large portion of the Company’s consolidated revenues, generate
a significant portion of its sales in the United Kingdom, North
American, continental European markets where the automotive
industry was severely impacted during the global economic
downturn in FY 2008-09. Even though sales of passenger cars in
certain of these markets were aided by Government-sponsored
car-scrap incentives, these incentives primarily benefited the
compact and micro-compact car segments and had virtually no
slowing effect on the sales declines in the premium car or all-
terrain vehicle segments, in which JLR operates. Although demand
in these markets has recovered strongly, any decline in demand for
the Company’s vehicles in these major markets may in the future
significantly impair the Company’s business, financial position and
results of operations. In addition the Company’s strategy, which
includes new product launches and further expansion into growing
