Strapped for cash and facing sagging demand in the automotive sector, Tata is fighting to justify buying JLR in the first place. Even the successful launch of the Nano, its Rs 1-lakh car, has helped little.

Within hours of the launch of the Nano in Mumbai, Group chairman Ratan Tata, in a television interview, appealed to the UK government to help JLR with loans for running the company. In an exclusive interview to UK's Sky News, Tata said that if flow of money continued to be an issue, "The damage is going to be quite devastating."

"Undoubtedly, if funds are not available, a company will not be able to run�so layoffs will take place, redundancies will take place necessarily," he said. Ironically, Ford had sold the company because it could not invest sufficiently in either R&D or product development.

Despite the Tatas pumping in millions of pounds into JLR after the acquisition, the company needs more. The onset of the worst economic recession since 1930 has made the challenge bigger.

"Jaguar and Land Rover had progressed significantly under Ford. In the 18 months prior to the credit crunch, it made an operating profit of �327 million in 2007 and �310 million in the first six months of 2008. The projections for 2008 had been positive, but both demand and consumer confidence were severely affected by the credit crunch and had a significant impact," a JLR spokesperson told Business Standard in an email response.

Eric Wallbank, director of automotive practice at Ernst & Young UK, said despite the challenges JLR faces today, Jaguar is one of the few brands that have reported positive growth in sales in the recent months. "Nobody expected the market for cars to go this way. It has come as a surprise and a disappointment to all," said Wallbank.

After the Tatas acquired the company, business challenges were mostly a result of adverse market conditions. In the first half of 2008, Jaguar's sales volume was 11.2 per cent more than in the same period in 2007 while Land Rover's was 0.6 per cent ahead of 2007 (the most successful year in its history). At the end of 2008, Jaguar was 8.2 per cent ahead of 2007 for the year, while Land Rover had felt the impact of the downturn and its full-year sales were 17.6 per cent less than in 2007.

In the first two months of 2009, Jaguar was 6.9 per cent ahead of 2008 and Land Rover 45 per cent down when compared with the same period last year.

There have been a series of non-production days at all three of its UK assembly plants -Castle Bromwich and Solihull in the West Midlands and Halewood on Merseyside. Each plant lost an average of 25 days' production, which equated to a volume reduction of approximately 25 per cent month on month, said the company spokesperson. Being an unlisted company, JLR does not discuss its production or sales volumes in absolute terms.

Analysts believe that Tatas' ownership of JLR will open doors for outsourcing of parts from India, particularly from the current pool of suppliers who service Tata Motors [Get Quote] in India. Abdul Majeed, automotive analysts for Pricewaterhousecoopers India, said, "Knowing the Tatas, there will be scope for cost-cutting by outsourcing from India in the long run." This option, however, may be a bit of a challenge given the current political climate in the UK due to rising unemployment.

Wallbank says, "This is nothing new. Even under Ford, some bit of work from JLR was outsourced from India. That door is still open for the Tatas."

Despite the challenges, there have been some good news, the company's 14,000-odd workers agreed to a two-year pay freeze on condition of no compulsory layoffs. This is expected to save the company up to �68 million a year. The company also bagged a significant order from China for supplying 13,000 cars worth �600 million over the next three years.

More recently, the UK government approved a grant of �27 million (Rs 192 crore) to JLR for producing a new eco-friendly car based on Land Rover's LRX Concept. Luxembourg-based European Investment Bank is also considering giving a loan of �275 million (Rs 2,100 crore) for research to reduce the CO2 emissions from JLR's future products.

Even as the Tatas envision a European version of the Nano by 2011-12, they have plans to take Jaguar and Land Rover to India. Market for luxury cars in India is bound to grow, opening up new opportunities for JLR in India, says Majeed.