The Tata Group, which as identified cash conservation as the number one priority for

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Jaguar Land Rover (JLR), has sent in Tata Daewoo CFO SUK Menon as group finance director at JLR to ensure that the parent doesn’t have to infuse anything more than $1.4 billion it already has, to keep JLR alive. The aim is to help the embattled luxury carmaker reduce cash burn as it faces drastic reduction in sales of gas guzzling sports utility vehicles (SUV).

For Menon, recently relocated to London from South Korea, the appointment comes at a crucial time of negotiations with the British government for a financing package in return for letting Downing Street have a say in the working of the luxury car brands.

A JLR pokesperson confirmed that SUK Menon had taken charge at the holding company that was formed by Tata Motors to hold the stake in the separate operating companies Jaguar Cars and Land Rover, which were spun out of the Ford Motor.

Abhay Phalke, head of shared services in Pune, and a veteran, who has been with the firm for almost three decades, now has been appointed as the new CFO of Tata Daewoo in Korea, according to a top Tata Motors official.

“At the operating company level too, we have a CFO — Ken Gregor, who took over when David Smith was appointed as the CEO of JLR,” the spokesperson said.

Tatas have identified managing cash flows as a key focus area for Jaguar, which has been suffering the double whammy of falling sales and a banking system that’s extremely negative on the automotive industry. Land Rover, which outsells Jaguar almost 2:1, has been hit by a drastic fall in sales of SUVs in all its key markets such as the USA, the UK and Europe.

In the period ending March 2009, JLR managed to raise borrowings of £135 million from external sources. But the Tatas were forced to provide five times that amount (£686 million or Rs 5,434.41 crore) as financing to the iconic brands.

Recently, Tata Motors vice-chairman Ravi Kant said the Tatas had expected JLR to raise $500 million in working capital loans on its own balance sheet but this did not happen. Tata Motors had to provide Rs 1,457.21 crore in financial year 2008-09, towards actuarial losses on the pension plans of Jaguar Cars and Land Ro-ver. The Bombay House top brass is now engaged in negotiations with the pension trustees over a revised contribution plan. An agreeme-nt over this new contribution required to meet liabilities to its erstwhile personnel have to be concluded by early July 2010, as per law.

Tata Motors itself has been struggling to divest investments and raise cash to reduce its 1.9: 1 consolidated debt to equity ratio. In order to limit the need for further cash infusion into JLR, the Tatas have decided to get actively involved in helping JLR manage cash flows in an adverse market situation.

JLR’s wholesale volumes between June 2008-March 2009, fell 32 per cent year-on-year causing the firm to report a pre-tax loss of £281 million (Rs 2,258 crore). On a post tax basis the company posted a rupee equivalent loss of Rs 2,458.97 crore on total income of £4,949 million (Rs 39,769.5 crore). On the manufacturing side, JLR has already restructured operations to improve throu-ghput in terms of vehicles per employee by 40 per cent in fiscal 08-09. But it still used up £242 million (Rs 1,940.33 crore) of cash on a net basis in its operations.

JLR has already reduced operations at its plants to single shift and also imposed down time at all assembly operations. Supplier payments are now cleared in 60 days instead of 45 days earlier while receivables owed to the luxury carmaker were reduced by £133 million (Rs 1,066.38 crore) to an average of 27 days of sales. This means the company now gets paid for sales in 27 days instead of an average of 38 days earlier.

JLR has also reduced its inventory levels by £217 million (Rs 1,739.88 crore) to 50 days of sales and reduced its labour costs by about 20 per cent.