Ronnie Schreiber
Publisher
Online Auto News Group

December 31, 2007

When it became known that two of the three finalists in Ford's sell off of Jaguar and Land Rover were Indian companies Tata and Mahindra & Mahindra the reaction of Jaguar's US dealer organization illustrates how little Americans know about India and it's economic might. The Wall Street Journal quoted Jaguar Business Operations Council chairman Ken Gorin as opposing the sale of those iconic luxury marques to an Indian company. "I don't believe the US public is ready for ownership out of India for a luxury-car brand such as Jaguar... I believe it would severely throw a tremendous cast of doubt over the viability of the brand," Mr Gorin told the Journal. Mr. Gorin went out of his way to say that he didn't question the management skills of either Indian conglomerate, but insisted that in the US market, subjective perceptions affect the reality of the marketplace and that either Chinese or Indian ownership of Jaguar would tarnish the brand's lustre in the eyes of consumers. Gorin's dealer group is said to favor the bid by One Equity, associated with former FoMoCo executive Jaques Nasser.

While some might say that Tata, a company about to announce the cheapest car in the world, their "One Lakh Car", would be a bad fit with a premium luxury marque like Jaguar, chances are good that Mr. Gorin and his fellow US Jaguar dealers have never heard of the One Lakh Car project. All they know is that Tata and M&M are based in India and they think of India as a place where they get connected when asking for technical support, not an industrial power. This isn't like Malaysia's Proton buying Lotus. Lotus is a tiny specialty firm that has stayed in business primarily on the strength of its engineering work for other car companies. Much as I admire Lotus, it's a brand known only to car buffs and teenagers who play racing video games. Jaguar is an icon among icons, its "leaper" mascot / hood ornament known as a symbol of luxury and performance around the world. So I can understand the culture shock the Jaguar dealers feel when they find that an Indian company they've never heard may own the firm Sir Lyons founded.

Much as it may not make sense to Mr. Gorin, the deal makes particular sense to Tata. The Tata family conglomerate controls billions in wide ranging assets and using the fast growing Indian economy as a foundation, has already made some large acquisitions to make itself into a global player, spending over $15.5 billion on companies outside of India. In 2000 Tata acquired Tetley Tea, making Tata Tea the #2 tea company in the world, and in January of 2007 Tata Steel purchased Corus Group, a maker of quality steels for $12B. Tetley and Corus are both based in the UK, as are Jaguar and Land Rover. No doubt the long relationship between Britain and India is a factor and perhaps this is reflected in the fact that the Jaguar and Land Rover unions in the UK have indicated they favor Tata.

In addition to access to technology, manufacturing facilties and the global market, buying Jaguar and Land Rover also fits well within Tata's strategies for the domestic Indian market. The luxury car market is exploding in India, with players like Mercedes, Rolls Royce and Lamborghini expanding their presence on the subcontinent, and Tata has hitherto focused on selling inexpensive cars. Purchasing Jaguar immediately gives Tata a stake in that fast growing market segment. Also, while Tata manufactures and sells a variety of commercial vehicles and trucks down to the Ace micro pickup, their passenger vehicles are primarily sedans. Acquiring Land Rover would immediately give Tata world class SUVs and allow them to compete more directly with Mahindra, which started as a Jeep licensee and primarily sells SUVs.

As of late December 2007 there have been leaks that Tata has won, but Ford seems insistent on waiting into the new year before they make a formal announcement, perhaps at the '08 North American International Auto Show in Detroit. Regardless of who Ford eventually favors, the billion dollar bids from Tata and M&M have given notice to the auto industry at large that they are global players and not simply content to grow domestically. To compete globally they will need technology and manufacturing assets and one sure way to get those quickly is through acquisitions and joint ventures. M&M is partnered with Renault to produce the low cost Logan in India and Tata is partnered with Fiat to give Tata engine technology for the One Lakh Car project (and also sell Fiats through the Tata dealer network). The Indian bids for Jaguar and Land Rover show that Tata and Mahindra are both also willing to reach deep into their pockets and play in the big leagues of the car business where company acquisitions are a fact of life. Just look at how many owners Jeep has had.