Thursday, March 27, 2008

Tata Buys Jaguar & Landrover - Is the Deal Ok?

Tata's deal with Ford has many skeptics. For one, what will be the effect of looming global economic downturn on the market? Then there is the troubled history of UK auto industry - particularly the labor trouble. While on one hand whole nation (except, perhaps the stock markets) felt jubilant after the deal, real success of the deal will hinge on how skillfully Tata's balance the demands of changing economic situations and demands of profitability. Read a Fortune story about the deal below. The story is aptly named 'Tata buys into 40 years of trouble'.
Tata also doesn’t seem all that concerned about instant profits – just as he doesn’t expect instant returns from the tiny Nano car he hopes to launch by year’s end. Instead, he is expected to use the brands and their U.K. plants, executives and labor to help build Tata Motors, which had $7.2 billion sales in fiscal 2007, into a global car company. He’s been on this mission for several years, buying Britain’s Tetley Tea in 2000, a Korea-based Daewoo truck plant in 2004 and steel giant Corus (previously British Steel) last year. Ratan Tata’s hands-off ownership could win him crucial support as he tries to fold the Jaguar and Land Rover brands into Tata. Mark Norbom, the head of General Electric in Japan, wrote recently in the Financial Times about the importance of the “soft side” of a takeover deal. The “look in the eyes that (the buying) company is worthy” has special value, said Norbom, and is something that “does not come naturally to the typical western-trained dealmaker.” Well, it seems to come naturally to Tata and his people. It was evident in the Corus deal, and it seems to be at work again in their Jaguar and Land-Rover plans. This could, of course, mean that Tata is seen - especially by British trade union leaders - as a soft option who will let workforces carry on as usual. Land Rover has had three years of record sales for Tata to build on. But there’s no telling how long the status quo can last, especially if demand slackens in the United States and elsewhere and Ratan Tata has to institute cutbacks at the luxury car makers.


Riding the Elephant Tata buys into 40 years of trouble «

Used-Car Bargain - Economist
(Update to original post)

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