Indian Firm Interested In Jaguar, Land Rover
Saturday, August 25, 2007
Indian business conglomerate Tata Group has confirmed its interest in purchasing the Jaguar and Land Rover units of Ford, making Tata the first company to publicly suggest it would pursue the brands.
In an interview with an Indian news channel broadcast yesterday, the firm's chairman, Ratan N. Tata, said "we certainly have some interest" in such a purchase, which would give a global presence to India's No. 1 commercial vehicle producer and the No. 3 maker of passenger vehicles.
The sale would give Ford the money it needs to implement its turnaround plan to stave off financial collapse. Ford declined to comment on Tata's remarks.
India's Mahindra & Mahindra, American private equity firms TPG and Ripplewood Holdings and possibly others are also thought to be in the chase for Jaguar, which Ford bought in 1989, and Land Rover, which it bought in 2000. Ford said in June that the British luxury brands were up for sale, and it plans to complete a deal by early next year.
Analysts said the U.S. credit crunch might complicate the plans of bidders for Jaguar and Land Rover, perhaps forcing them to contribute more equity to execute a deal or agree to more lender-friendly terms. They said that Tata and other companies in India are flush with cash from a booming domestic economy, however. Many are also eager to play roles on the world stage and see themselves as challengers to the economic ascendancy of the Chinese.
"Jaguar and Land Rover catches everybody's eye," said C.V. Ramachandran, industry analyst at AlixPartners. "They are two brand names that get recognized across the world."
Besides luxury names, Tata would gain access to the companies' product development expertise that could act as the base of future expansion into the world's passenger car market, he said. Tata also could shrink its supplier costs by sourcing more auto parts and design projects in India.
Like Ford, Tata started more than 100 years ago as a family company. It has grown into a $42 billion conglomerate consisting of 96 companies, with strong positions in commercial vehicle building, software development and steel. Tata has about 16,000 U.S. employees and has been snapping up luxury hotels in the United States, including the Ritz-Carlton in Boston, which is being renamed the Taj Boston.
Jaguar and Land Rover were among the crown jewels of Ford's automotive holdings. The period when the two companies were acquired by Ford was one in which auto chiefs sought to buy rivals, arguing that synergies from the combined operations would deliver profits. But sharing many components between Ford vehicles and the upscale Jaguar and Land Rover proved too risky or difficult to achieve.
Last year, Ford lost $12.61 billion, and it continues to burn cash as executives struggle to revamp the company.
In a roundtable with journalists this week, Ford chief executive Alan R. Mulally said the varied automotive brands were draining Ford of "cash, money and talent." He said Ford was looking for a buyer who could provide greater focus on the brands.
A potential deal to sell the British brands illustrates not only Ford's bottom-line concerns but the changing dynamics of the world auto market, as well.