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Tatas could soon own Jaguar & Land Rover

Here’s why the acquisitions are vital to the megacorp’s global dreams, report S Layak and S Ghosh.

autos Updated: Dec 22, 2007 09:10 IST

When the Tatas’ acquisition of auto icons Jaguar and Land Rover is completed, it will be one of the most crucial steps in the Indian conglomerate’s march towards a significant global presence.

It was only early this month when the bad news just didn't seem to end. Influential research firm JD Power placed Tata Motors at the very bottom of two surveys on the quality of cars in South Africa. The Tata dream of being an international auto major seemed unattainable. But the Jaguar and Land Rover acquisition could change all that.

<b1>Ironically, once the buyouts are sealed, Tata Motors could find itself atop the JD Power ratings on the back of Jaguar, which has regularly topped the surveys in the US and UK. In South Africa, where Indica got the thumbs down, Land Rover is ranked well above the industry average.

The Tatas’ $2.1 billion (Rs 8,000 crore) bid for the Ford-owned brands may become a reality in the new year. Ford spokesperson John Gardiner said: "There is no announcement now. An agreement may be expected early next year."

The acquisitions are crucial to the Tatas. Without them, its global automobile aspirations are incomplete. Tata Motors made the first indigenously produced passenger car in India. The company is also celebrating the rollout of 10 lakh Indicas, launched 10 years ago — roughly 1 lakh cars a year. In contrast, Jaguar’s sales in the US fell to a mere 20,000 units last year.

The synergies are obvious. Tata Motors lacks the technology and the finishing to make its cars world-class. Jaguar and Land Rover, while highly-coveted and technologically superior, simply don’t have the cost advantages to sustain themselves. It’s a perfect match — Jaguar and Land Rover bring in the class and technology, the Tatas provide the numbers and keep costs low.

The Tatas’ Rs 465-crore purchase of Daewoo Commercial Vehicles in 2004 achieved something similar. Daewoo had the high-powered engines and the technology to meet global emission standards, which the Tatas lacked. The Indian conglomerate provided the marketing muscle.

The dire straits Jaguar and Land Rover find themselves in will not intimidate the Tatas. Chairman Ratan Tata started his career by bringing Nelco, an ailing manufacturer of consumer electronics, back into the black. The Tatas showed they could do it again, with Daewoo first and then with the Rs 50,800-crore buyout of Corus, the troubled European steelmaker.

The Tatas’ global sweep doesn’t end there. They have tied up with the Warwick Manufacturing Group for automotive research and have an understanding with Fiat for engine supplies. The Tatas also have tie-ups with SAP and Symantec for network technology.