Opinion - Editorials   

Acquiring iconic brands

The acquisition by Tata Motors of Jaguar and Land Rover from their American owners, Ford Motor Company, for $2.3 billion is a development whose significance extends beyond the automobile industry and the world of iconic brands. The largest overseas investment by an Indian company in the automobile sector, the deal has taken almost nine months. By the end of last year, the Tatas had emerged as the front runners. Apart from besting rival bids, they won the endorsement of the trade unions who were understandably apprehensive about their future should one or the other of the private equity firms in the race succeed. Ford is contributing $600 million to the pension fund corpus of Jaguar and Land Rover and will continue to supply Jaguar with engines, stampings and components. More significantly, Ford has agreed to provide access to its hybrid and low emission power train technology. That should allay the fears of environmentalists in the United States, which is by far the biggest market for Jaguar and Rover. One concern is that the U.S. is sliding into a recession and car sales especially of premium brands are falling. The continuing crisis in the financial markets will raise the costs of funding the deal.

These are not insurmountable problems, certainly not for a group that has defied odds and successfully concluded several landmark cross-border acquisitions in recent years. Shortly after striking the latest deal, Ratan Tata said it would be his group’s endeavour to build on the heritage and competitive value of the two iconic brands and preserve their identities. The crucial question is how Tata Motors will balance the two premium brands with the rest of its passenger car portfolio dominated by compact cars. Critics have pointed to the lack of substantial synergies between the two luxury brands and a company that is known as a maker of trucks and basic cars. On the other hand, Tata Motors, with its undoubted manufacturing strengths, vision and capacity to innovate, has been coming up with surprises all the time, as it did in an entirely different context and at the other end of the price spectrum with the Nano. The acquisition price looks reasonable. Both Jaguar and Land Rover are seen to be turning around after a fairly long period of troubles. They also have perfectly viable plans for refurbishing their image and regain market share. It is in the fitness of things that one of India’s most admired industrial groups should take over the premium brands.

Printer friendly page  
Send this article to Friends by E-Mail

Stories in this Section

In pursuit of justice
Acquiring iconic brands
Bigotry in the land of freedom
Iran wants full membership of Shanghai Cooperation Organisation
A case for more women in public life, and how
Corrections and clarifications
Ray of hope
Significant
Justice for Shivani
Pay Commission
‘Price rise and agrarian crisis, issues the government has not addressed’

Copyright © 2008, The Hindu. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu