March 27, 2008
India’s Tata Buys Jaguar and Land Rover
By Bernice Hurst, Managing Director, Fine Food Network
Big cars, little cars, tea bags and steel girders now comprise the portfolio of Indian-owned conglomerate, Tata. By announcing its $2.3 billion purchase of British car brands Jaguar and Land Rover from the American-owned Ford Motor Company, the group has extended its product range to include something for everyone.
In January 2008, Tata launched the world’s cheapest car, the Nano, priced at $2,500. At the other end of the scale, Jaguar’s XF sports model starts at around $64,000. Activities in India involve creating and servicing the small but rapidly growing vehicle market. Tata’s latest acquisitions will increase an international presence, which already incorporates the commercial vehicle operations of South Korea’s Daewoo, joint ventures with bus-makers in Spain and Brazil and projects in Germany with Porsche and Volkswagen. It has also developed links in the U.S. with Chrysler.
Tata has reportedly paid Ford just half of what the brands originally cost. It is generally believed that Ford failed to make any profit while it owned Jaguar. The company also sold its high end Aston Martin range last year and will now focus on shifting its core U.S. business from red to black.
Alan Mulally, Ford’s president and chief executive, said he was “confident” that the brands would continue to thrive under Tata’s stewardship. “Now, it is time for Ford to concentrate on integrating the Ford brand globally, as we implement our plan to create a strong Ford Motor Company that delivers profitable growth for all,” he said.
Chief executive Kant wants Tata Motors to grow globally. India’s largest industrialist owns subsidiaries specializing in IT services, power generation, tea production and steel including U.K.-based Tetley Tea and Corus.
According to the BBC, Tata’s revenues in the financial year to March 2007 “were equivalent to some 3.2 percent of India’s gross domestic product.” The group employs almost 290,000 people in 80 countries. As Western countries outsource jobs to India, Indian companies are using their wealth to move outside their own boundaries, driving business growth in more ways than one.
Discussion questions: What do you make of the rise of Tata and this new breed of multinational? What does it portend for U.S. manufacturers? Do you expect a comeback from Ford and other U.S. automakers? Are they capable of the kind of re-engineering necessary to compete in today’s world markets?
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Ouch! This hurts on so many levels–none of which have to do with Tata being a bad company. During my stint on the international side at Pepsico we had some interaction with Tata and found them most capable managers.
But I have also been a British Leyland enthusiast in one form or another since my first old Land Rover in high school. Not many kids went for a vehicle that would only do 65mph tops, but it would climb mountain trails to trout streams extraordinaire! College brought different interests–and therefore vehicular requirements of course–and a slick Triumph in British Racing Green turned the trick. Corporate life allowed me to graduate to Jaguars–XJS if you please. And V12’s and ragtops ruled the road from Dallas to Darwin. Who cares which side the steering wheel is on–right!?!
But it has been challenging to watch what Ford has done with the business. Land Rover has flourished when they stick to their “rugged luxury” positioning and stumbled when they try to move down market to attract new buyers–no different than other marques from Mercedes to Cadillac. Jaguar certainly has benefited from a more consistent approach to quality control. But styling? Let’s just say I haven’t traded since the XJS model was redesigned to look like a Taurus.
Who knows what Tata management will bring? But here’s hoping it is a preservation of the spirit of the marque!
U.S. automakers have been talking about retooling to meet changing market demands for the past 20 years. So far, they have failed to do so and I see few signs that they will succeed this time around. They are still saddled with big labor contracts and payouts and I don’t think Detroit (not just Ford) has the chops to do it. I sincerely hope I’m wrong.
They lost the business to the Japanese in the 70s and now they will lose more of it to India, Korea and maybe even the Chinese carmakers. Although that may be a tough sell. Probably the U.S. industry will simply end up outsourcing the business to the very people that took it from them.
As to Ford Selling off Jaguar, it may be the best thing that happens to the marque. When I see some of the models on the road these days, I can’t help thinking how much they look like a Toyota. Very sad!
These questions cover a good deal of fairly disparate ground but let me take a stab at them.
Will more commercial conglomerates emerge from nations we’ve come to think of as emerging or outsourcing centers? Of course! It’s their time in history.
Will U.S. automakers stage a comeback? Unlikely unless they stop marketing cars in North America. General Motors, for example, is doing well across the globe–it’s the American market that’s killing them.
As to whether they can re-engineer their way out of it, that’s like expecting an alcoholic to drink themselves sober.
Western multinational companies who are accustomed to dominating world markets better watch out! Tata and similar emerging multinational companies have not only the best talent but also the best management practices. Their senior management has long term vision, they are not shackled by the opinions of Wall Street analysts, and above all, they are not over confident or arrogant. They are focused on adding/increasing value to the customer, not just cutting costs.
Just look at what Laxmi Mittal has done. All I can say is, do not underestimate these emerging multinational companies. If you do, it would be at your own peril!
The idea of Tata’s purchase of Jaguar and Land Rover giving Tata a stronger position is not new, unusual, or startling. It is one more step in the process of strong global competitors from more countries.
In addition to size and variety of industries, Tata currently employs more more foreign employees in the US holding H1 visas than any other company according to BusinessWeek. Tata’s growth is not an isolated incident but one more step in the change taking place in world markets.
As to the second question, I see little likelihood that Ford can or will work itself out of the problem. It will have cash after the sale. However, the CEO of Ford’s statement in BusinessWeek over a year ago that we know our current business model is broken but we don’t know which one will work does not indicate an understanding of the environment, the marketplace, the consumers, or how to create competitive differentiation. If you don’t know where you are going, how do you know which road to take?
How ironic that a company from the former Crown Jewel of the British Empire now owns these UK Crown Jewel brands.
If American car-makers had any future, they would have moved their respective headquarters to Phoenix, Dallas, and Charlotte twenty years ago. Detroit is an aristocratic barony, doomed as certain as the day is long.
This just goes to show what a manufacturing company can do when it isn’t saddled with labor unions, environmental regulations, crash test dummies and any social responsibility.
India is almost equivalent to early 20th century development (as compared to the USA). Unlike the USA, they are not isolated from the world by two oceans. China is to their east and the middle east and eastern Europe to their west. In our case, transportation alone isolated our markets to North America. Tata can utilize the teeming masses of SE Asia and explosive growth in the area for continuing base profits while they exploit the Land Rover and Jaguar brands to expand their influence in the Middle East, Europe and China. Look for production and technology to move freely between these western brands and their Indica, Indigo and Sumo brands.
A great move for Tata and a possible bale out for Ford. I hope this will be enough for Ford and I hope they got long term commitments for engines and other components. Good Luck to all!
Tata paid for a product that they can neither use nor benefit from. The saw stars and a discounted price that appealed to their sense of value. Unfortunately, they won’t be selling these brands in India (or anywhere else) as much as their western counterparts might have led them to believe.
These brands have been sold and resold not from poor ownership, but a poor model with incredibly high costs that dooms the brand from the start. Tata would have been better off spending these resources on maximizing their own brand (or creating a new one) instead of trying to get more traction from an old, tired, brand.
From what I have read, no real auto industry experts here except for a real enthusiast for Jaguar. Nor, am I any real expert. Although aside from groceries, it’s the nearest thing to my heart for as far as industries go. Where I grew up had everything to do with it. My father worked in the auto industry for over 45 years as did at least a parent of just about every kid I grew up with. If they didn’t, they worked for someone doing something for the industry.
Who really knows what Tata can do with these brands? I will say in looking at the Rover’s at the most recent auto show, they were of the finest vehicles I’ve seen. In addition, Ford which was ‘the enemy’ when I grew up, had an incredible selection as well. I was as surprised as I would think likely anyone would be that took an honest unbiased look.
The most recent GM vehicles I’ve owned have been of the best quality and performance of any I have owned (and that is many!).
The problems facing the Detroit makers are little to do with the vehicles themselves and have everything to do with two areas–marketing and experience of ownership. Let’s face it, they have lost the battle with those who have left for Toyota, Honda or whichever. They are gone. They have, however, never been able to produce a marketing campaign to entice even new or open minded buyers to take an honest and unbiased look.
In addition, while the cars are equal to or in most cases, better than their competitors, they have done little to improve their experience of ownership. In this regard I am not speaking of the cars themselves. The experience there is great. The dealership network however is lost in the 70s and 80s.
These owners hold the key to whether or not Detroit sustains itself. It’s a real problem. I’ve yet to see any real action by any of what would be considered Detroit makers to make any real changes that the consumers would expect. These changes have little to do with the styling of the buildings, they have everything to do with what happens while you are there.
Finding a way to appeal to an open minded consumer and to improve their experience of ownership will determine the destiny for Detroit makers. While they continue to improve and produce the best cars in the world, they stand little chance of re-acceptance without dramatic and expedient changes in these two areas. Even for a loyalist like myself, continuing to accept the experience becomes very difficult. There really is nothing wrong with owning a Toyota or a Honda or the like. For those like me to be thinking in that regard, there remains a real problem.
As for Tata….
American automakers need to think differently. Sell twice the number of vehicles as they do now at half the price. Make them smaller; quadruple fuel economy; sell them as the commodities they are. Spend less on marketing and PR, more on hi-tech engineering.
Tata’s been gypped. Tata should’ve demanded that Ford pay them to take Jaguar and Land Rover off their hands. Ford is lucky they found someone solvent to take those businesses off their hands. Now that Ford found a buyer for the UK losers, they need to find a buyer for US losers. How soon can they sell the US and Canadian Ford and Mercury brands?
The sense of entitlement that GM continues to trade on here will continue to drag them down. Bob Lutz’s attitude that “we are right–there must be something wrong with the market” will seal their fate.
The $200 million spent on the Malibu launch when there were not even cars in the showrooms shows how far they have strayed from the path.
Ford continues to make products to a price. This has resulted in some quite good products that are unfortunately not quite good enough. Crazy. If you are going to lose money anyway, you should definitely lose money making cars that people buy and retain market share rather than lose money making cars that don’t sell. That path leads to oblivion.
Jaguar and Land Rover are certainly battered brands but by no means unsalvageable. There are many people who would love to buy a product that isn’t German or Japanese–if they are worthy, of course. Fingers crossed for new Jag.
Why would you dismiss Tata’s capacity to understand this and underestimate their ability to capitalize on it?
Maybe it is because the balance of economic power is inexorably shifting and we just don’t like it. It is not our game or even our ball any more. Get over it and learn the new rules.
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Ouch! This hurts on so many levels–none of which have to do with Tata being a bad company. During my stint on the international side at Pepsico we had some interaction with Tata and found them most capable managers.
But I have also been a British Leyland enthusiast in one form or another since my first old Land Rover in high school. Not many kids went for a vehicle that would only do 65mph tops, but it would climb mountain trails to trout streams extraordinaire! College brought different interests–and therefore vehicular requirements of course–and a slick Triumph in British Racing Green turned the trick. Corporate life allowed me to graduate to Jaguars–XJS if you please. And V12’s and ragtops ruled the road from Dallas to Darwin. Who cares which side the steering wheel is on–right!?!
But it has been challenging to watch what Ford has done with the business. Land Rover has flourished when they stick to their “rugged luxury” positioning and stumbled when they try to move down market to attract new buyers–no different than other marques from Mercedes to Cadillac. Jaguar certainly has benefited from a more consistent approach to quality control. But styling? Let’s just say I haven’t traded since the XJS model was redesigned to look like a Taurus.
Who knows what Tata management will bring? But here’s hoping it is a preservation of the spirit of the marque!
U.S. automakers have been talking about retooling to meet changing market demands for the past 20 years. So far, they have failed to do so and I see few signs that they will succeed this time around. They are still saddled with big labor contracts and payouts and I don’t think Detroit (not just Ford) has the chops to do it. I sincerely hope I’m wrong.
They lost the business to the Japanese in the 70s and now they will lose more of it to India, Korea and maybe even the Chinese carmakers. Although that may be a tough sell. Probably the U.S. industry will simply end up outsourcing the business to the very people that took it from them.
As to Ford Selling off Jaguar, it may be the best thing that happens to the marque. When I see some of the models on the road these days, I can’t help thinking how much they look like a Toyota. Very sad!
These questions cover a good deal of fairly disparate ground but let me take a stab at them.
Will more commercial conglomerates emerge from nations we’ve come to think of as emerging or outsourcing centers? Of course! It’s their time in history.
Will U.S. automakers stage a comeback? Unlikely unless they stop marketing cars in North America. General Motors, for example, is doing well across the globe–it’s the American market that’s killing them.
As to whether they can re-engineer their way out of it, that’s like expecting an alcoholic to drink themselves sober.
Western multinational companies who are accustomed to dominating world markets better watch out! Tata and similar emerging multinational companies have not only the best talent but also the best management practices. Their senior management has long term vision, they are not shackled by the opinions of Wall Street analysts, and above all, they are not over confident or arrogant. They are focused on adding/increasing value to the customer, not just cutting costs.
Just look at what Laxmi Mittal has done. All I can say is, do not underestimate these emerging multinational companies. If you do, it would be at your own peril!
The idea of Tata’s purchase of Jaguar and Land Rover giving Tata a stronger position is not new, unusual, or startling. It is one more step in the process of strong global competitors from more countries.
In addition to size and variety of industries, Tata currently employs more more foreign employees in the US holding H1 visas than any other company according to BusinessWeek. Tata’s growth is not an isolated incident but one more step in the change taking place in world markets.
As to the second question, I see little likelihood that Ford can or will work itself out of the problem. It will have cash after the sale. However, the CEO of Ford’s statement in BusinessWeek over a year ago that we know our current business model is broken but we don’t know which one will work does not indicate an understanding of the environment, the marketplace, the consumers, or how to create competitive differentiation. If you don’t know where you are going, how do you know which road to take?
How ironic that a company from the former Crown Jewel of the British Empire now owns these UK Crown Jewel brands.
If American car-makers had any future, they would have moved their respective headquarters to Phoenix, Dallas, and Charlotte twenty years ago. Detroit is an aristocratic barony, doomed as certain as the day is long.
This just goes to show what a manufacturing company can do when it isn’t saddled with labor unions, environmental regulations, crash test dummies and any social responsibility.
India is almost equivalent to early 20th century development (as compared to the USA). Unlike the USA, they are not isolated from the world by two oceans. China is to their east and the middle east and eastern Europe to their west. In our case, transportation alone isolated our markets to North America. Tata can utilize the teeming masses of SE Asia and explosive growth in the area for continuing base profits while they exploit the Land Rover and Jaguar brands to expand their influence in the Middle East, Europe and China. Look for production and technology to move freely between these western brands and their Indica, Indigo and Sumo brands.
A great move for Tata and a possible bale out for Ford. I hope this will be enough for Ford and I hope they got long term commitments for engines and other components. Good Luck to all!
Tata paid for a product that they can neither use nor benefit from. The saw stars and a discounted price that appealed to their sense of value. Unfortunately, they won’t be selling these brands in India (or anywhere else) as much as their western counterparts might have led them to believe.
These brands have been sold and resold not from poor ownership, but a poor model with incredibly high costs that dooms the brand from the start. Tata would have been better off spending these resources on maximizing their own brand (or creating a new one) instead of trying to get more traction from an old, tired, brand.
From what I have read, no real auto industry experts here except for a real enthusiast for Jaguar. Nor, am I any real expert. Although aside from groceries, it’s the nearest thing to my heart for as far as industries go. Where I grew up had everything to do with it. My father worked in the auto industry for over 45 years as did at least a parent of just about every kid I grew up with. If they didn’t, they worked for someone doing something for the industry.
Who really knows what Tata can do with these brands? I will say in looking at the Rover’s at the most recent auto show, they were of the finest vehicles I’ve seen. In addition, Ford which was ‘the enemy’ when I grew up, had an incredible selection as well. I was as surprised as I would think likely anyone would be that took an honest unbiased look.
The most recent GM vehicles I’ve owned have been of the best quality and performance of any I have owned (and that is many!).
The problems facing the Detroit makers are little to do with the vehicles themselves and have everything to do with two areas–marketing and experience of ownership. Let’s face it, they have lost the battle with those who have left for Toyota, Honda or whichever. They are gone. They have, however, never been able to produce a marketing campaign to entice even new or open minded buyers to take an honest and unbiased look.
In addition, while the cars are equal to or in most cases, better than their competitors, they have done little to improve their experience of ownership. In this regard I am not speaking of the cars themselves. The experience there is great. The dealership network however is lost in the 70s and 80s.
These owners hold the key to whether or not Detroit sustains itself. It’s a real problem. I’ve yet to see any real action by any of what would be considered Detroit makers to make any real changes that the consumers would expect. These changes have little to do with the styling of the buildings, they have everything to do with what happens while you are there.
Finding a way to appeal to an open minded consumer and to improve their experience of ownership will determine the destiny for Detroit makers. While they continue to improve and produce the best cars in the world, they stand little chance of re-acceptance without dramatic and expedient changes in these two areas. Even for a loyalist like myself, continuing to accept the experience becomes very difficult. There really is nothing wrong with owning a Toyota or a Honda or the like. For those like me to be thinking in that regard, there remains a real problem.
As for Tata….
American automakers need to think differently. Sell twice the number of vehicles as they do now at half the price. Make them smaller; quadruple fuel economy; sell them as the commodities they are. Spend less on marketing and PR, more on hi-tech engineering.
Tata’s been gypped. Tata should’ve demanded that Ford pay them to take Jaguar and Land Rover off their hands. Ford is lucky they found someone solvent to take those businesses off their hands. Now that Ford found a buyer for the UK losers, they need to find a buyer for US losers. How soon can they sell the US and Canadian Ford and Mercury brands?
The sense of entitlement that GM continues to trade on here will continue to drag them down. Bob Lutz’s attitude that “we are right–there must be something wrong with the market” will seal their fate.
The $200 million spent on the Malibu launch when there were not even cars in the showrooms shows how far they have strayed from the path.
Ford continues to make products to a price. This has resulted in some quite good products that are unfortunately not quite good enough. Crazy. If you are going to lose money anyway, you should definitely lose money making cars that people buy and retain market share rather than lose money making cars that don’t sell. That path leads to oblivion.
Jaguar and Land Rover are certainly battered brands but by no means unsalvageable. There are many people who would love to buy a product that isn’t German or Japanese–if they are worthy, of course. Fingers crossed for new Jag.
Why would you dismiss Tata’s capacity to understand this and underestimate their ability to capitalize on it?
Maybe it is because the balance of economic power is inexorably shifting and we just don’t like it. It is not our game or even our ball any more. Get over it and learn the new rules.