Indian conglomerate Tata has acquired Ford’s ailing brands Jaguar and Land Rover for $2.3 billion.

For years, Jaguar has been a millstone round Ford’s neck.

We find it hard to accept that this is a smart business move from the Tata Group.

For several years, Lexus, BMW and Mercedes have made mincemeat of Jaguar.

Jaguar has not had many takers for years and it seems doubtful that rich Americans and Britons will flock to buy a luxury car owned by a third world company.

Would wealthy Indians buy a luxury car made in Bangladesh?

The transfer of ownership to Tata Motors is expected to happen by the end of the second quarter of 2008.

Founded in 1922, Jaguar has been amongst the worst premium brands for luxury saloons and sports cars.

Land rover’s first design appeared in 1948.

Jaguar and Land Rover have been under Ford’s ownership since 1989 and 2000 respectively and together have about 16,000 employees.

As part of the deal, Ford promised to continue to supply Jaguar and Land Rover for differing periods with powertrains, stampings and other components.

Tata Consultancy Services has won a multi-year contract to provide IT services to ailing U.S. car company Chrysler.

The value of the deal was not disclosed.

TCS will provide application maintenance and support services to Chrysler.

TCS said the IT services contract would include functional areas within Chrysler such as sales and marketing and shared services.

American auto giant General Motors has reported a mega-loss of $38.7 billion in 2007.

The massive loss was mostly due to three reasons:

* A charge related to unused tax credits in the third quarter
* GM produces some of the crappiest cars that no one wants to buy
* Decades of poor management

GM’s North American unit remains in ICU (intensive care unit) and posted a $1.5 billion loss in 2007.

But Indians seem to love those ugly GM boxes because the company’s sales rose 74% in India last year. Of course, the high growth rate in India could also be on a lower base.

Once the Tata Nano starts production, guess GM will have to try its luck in Myanmar (Burma) or Bangladesh.

The terminally sick GM is now trying to bribe 74,000 hourly employees into quitting by offering them buyouts.

GM sold 9.4 million vehicles in 2007, up 3% year-over-year.

Now that Ratan Tata has unveiled the much anticipated $2,500 Tata Nano at the Delhi Auto Expo, the two big questions are what does the People’s Car mean for existing foreign players like Ford, GM and Suzuki who have set up operations in India and what impact will it have on Tata’s aspirations for the high-end Jaguar and Land Rover brands it’s trying to acquire from Ford.

Tata Nano - People’s Car?

Ford and GM are in pretty bad shape here in the U.S., mere caricatures of their once glorious selves.

With the Chinese Chery expected to enter the American market in the not too distant future (and further decimate what’s left of the U.S. auto makers), Ford and GM were betting big on sizable markets in developing nations like India.

And why not? After all, as the New York Times reported yesterday, car sales in India are growing at over 20% annually compared with 3% globally.

But Tata Motors has thrown a spanner in the works of Ford, GM and Suzuki in the form of the People’s Car now christened Tata Nano.

American auto companies with their fat pay structure for senior executives and crumbs for the rest have little to show in their cars by way of innovation. The only way Ford, GM and Chrysler can sell their ugly boxes in the U.S. is through massive discounts, no-interest loans or by dumping them on the rental car chains.

The only mantras U.S. car makers know are layoffs and outsourcing. And both those shibboleths are not going to help them in India when they compete against the Tata Nano.

It’s hard to see how Ford or GM can effectively compete against a $2,500 car assuming the Tata Nano is a decent effort.

Ford sales are already slipping in India and the company is making some noise about a small car. Seems like an effort to create FUD (Fear, Uncertainty and Doubt) in the market.

GM seems to have done well in India in the first half of 2007 but we remain skeptical that they can maintain the momentum.

Most likely, Ford and GM will have to curb their enthusiasm and kiss their

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Even before Tata’s $2,500 (Rs 100,000) car hits Indian roads, American auto maker Ford is singing a melancholic tune.

Ford acknowledged that its car sales in India in 2008 would be the same as last year - 40,000 (which itself was lower than the 2006 sales figure of 42,060 units).

Sure looks like Ford’s troubles in the U.S. have reached Indian shores.  

Ford India Managing Director Arvind Matthew told the Wall Street Journal (subscription required) that high interest rates in India and global economic uncertainty would restrain purchases this year.

Only after Ford’s proposed small car rolls off the assembly lines and demand improves does the company expect to fully utilize its 200,000 local production capacity.

Meanwhile, Ford is investing $500 million to make a small, inexpensive car for the local market within the next two years, and to build a engine manufacturing plant that will go online by 2010.

Ford’s small car for the Indian market is expected to be priced between Rs 300,000 to Rs 400,000.

Ford said the new investment would boost its financial commitment in India to $875 million, and underscored its plan to elevate India as one of the strategic production hubs for small cars in the company’s Asia Pacific and Africa region.

Why the heck is India’s Tata group itching to buy Ford’s dying auto brands Jaguar and Land Rover?

Just doesn’t make sense to us as to why Tata - now the clear frontrunner to pick up Ford’s struggling Jaguar and Land Rover units - wants to acquire these two white elephants.

Both Jaguar and Land Rover are have beens that have no cachet anymore in the U.S., one of the biggest auto markets in the world.

Don’t tell us luxury brands like Jaguar and Land Rover that have failed in the U.S. are going to resonate well elsewhere in the world. Come on, get real.

As anyone who has driven on U.S. highways can tell you, the luxury auto brands that matter in the U.S. are Lexus, BMW and Mercedes. And it has been that way for several years.

Jaguar and Land Rover are part of Ford’s Continue Reading…

U.S. Jaguar car dealers are opposed to selling the premium Jaguar brand to an Indian company saying that it would screw the brand’s luxury image.

Two Indian companies Tata and Mahindra have expressed interest in acquiring the Jaguar brand from Ford.

Ken Gorin, Chairman of the Jaguar Business Operations Council, a group representing Jaguar car dealers in the U.S., told the Wall Street Journal (subscription required):

I don’t believe the U.S. public is ready for ownership out of India….I believe it would severely throw a tremendous cast of doubt over the viability of the brand.

Jaguar’s U.S. dealers prefer that the Jaguar brand be sold to One Equity Partners, a unit of J.P.Morgan Chase. One Equity is headed by Jacques Nasser, a former Ford executive.

For Gorin, the main issue is image of a luxury brand and not the management capabilities of Tata or Mahindra:

My concern is perception [in the marketplace], and perception is reality…It’s about saying there are unique image issues with two of the bidders that the other one doesn’t have.

Gorin told the WSJ that his concerns wouldn’t be valid if Jaguar was a mass-market brand:

We’re a luxury brand. … There are a number of subjective items that create the luster of a brand….I don’t mean to be negative towards anyone. I don’t think we could have a Chinese-owned Jaguar.

In our view - in the U.S. at least - Jaguar just doesn’t have anywhere near the cachet of a BMW, Mercedes or Lexus any more.

Some 10 years back driving through the North shore of Long Island in New York, we would see quite a few Jaguars. But the last few times we were in the same area we hardly saw any Jaguars.

Whether the eventual buyer is Tata, Mahindra or One Equity Partners, it probably does not matter because Jaguar has become mostly irrelevant now.

To modify Marlon Brando’s classic lines from On the Waterfront:

Jaguar could have been a contender. Jaguar could have been somebody instead of a washout, which is what it is now.

India’s Tata Motors Ltd is said to be in the leading position to acquire Ford’s struggling Jaguar and Land Rover units.

The folks at the Wall Street Journal say that besides Tata, firm bids were received from Ripplewood Holdings LLC of New York and One Equity Partners (a unit of JP Morgan Chase).

The WSJ story says that the sale of Jaguar and Land Rover is entering the final stage and potential buyers will meet Ford labor leaders on November 20:

Tata Motors’ bid is increasingly seen as having an edge over other would-be buyers, said people familiar with the sale process. Tata is the only car maker to have submitted a bid, which could be an advantage over financial bidders. Tata may be able to offer a higher price, because it would have the possibility of offsetting the extra expense by leveraging economies of scale with its existing production operations, people familiar with the matter said.

The FT had earlier reported that Mahindra was also eyeing the Jaguar and Land Rover units.

Jaguar and Land Rover are units of Ford’s luxury Premier Automotive Group, which has fared badly for four out of the last five years.

Ford acquired Jaguar in 1990 for $2.5 billion and purchased Land Rover in 2000 for $2.68 billion from BMW.

Auto giant General Motors is struggling to sell its cars in the U.S. but is making steady headway in India.

In the U.S., GM is shutting down more plants, cutting production, firing more employees, slashing wages for new workers and seeing lower car sales. In the third quarter, GM car sales fell 6.1% in North America. Recently, GM dumped its healthcare obligations to a Voluntary Employee Benefit Association run by the unions.

Overall, the outlook for GM in the U.S. is pessimistic, according to a recent story in the Wall Street Journal (subscription required):

The struggle to turn the tide in North America promises to remain daunting for GM and its top competitors over the next 15 months as car buyers continue wrestle with overarching economic concerns, notably a sustained downturn in the housing market.

 GM sales analysis manager Paul Ballew said on a conference call recently:

The U.S. is a head wind we continue to wrestle with on a global basis.

Bottomline, the sheen has worn off the GM brand in the U.S.

But India and China are silver linings in the dark clouds hovering above GM.

According to a recent AP story, GM more than doubled the number of cars it sold in India in the past six months.

GM is also expanding its dealer network in India and providing longer warranties. General Motors India VP P.Balendran said:

Finally, we are getting our products right, our prices right. And we have become more customer-friendly.

The AP story notes that for the first time GM’s market share in India topped that of its rival Ford.

In April, GM chairman Rick Wagoner was on hand for the launch of the company’s Spark mini-car in India.

Japanese car and pickup manufacturer Toyota is looking to sell 10.4 million vehicles in 2009 partly by significantly ramping up sales in India, China, Russia and Brazil.

According to a story in Saturday’s Wall Street Journal, Toyota wants to quadruple sales in India to 200,000 vehicles by 2010.

Toyota’s equally ambitious about the Chinese market, where it wants to sell over a million vehicles by 2010.

While it’s not abandoning its traditional markets, Toyota clearly sees more opportunities in emerging markets.

Toyota CEO Katsuaki Watanabe told the WSJ (subscription required):

New markets outside Japan, the U.S. and Europe are the key to future success.

With much of the American auto industry in doldrums, the stars seem to be aligned in favor of Toyota reaching the 10 million goal.

If Toyota hits its ambitious target, it’ll be the first to sell over 10 million cars annually, notes the WSJ. The company is expected to sell 9.34 million vehicles this year.

The FT is reporting that Indian auto company Mahindra & Mahindra is also interested in Ford’s Land Rover and Jaguar units.

According to the FT piece, Mahindra is conducting due diligence on Land Rover and Jaguar.

Tata Motors has already expressed its interest in the two Ford brands. See our earlier posting on Tata Eyeing Ford Disasters.

Indian business house Tata is interested in buying Jaguar and Land Rover, two disasters that struggling U.S. auto maker Ford is looking to jettison.

Apparently, Tata Motors is looking to expand beyond India, which now accounts for the overwhelming majority of its sales. Hence its interest in Jaguar and Land Rover.

Jaguar and Land Rover are part of Ford’s luxury Premier Automotive Group, which has fared badly for four out of the last five years.

Ford bought Jaguar in 1990 for $2.5 billion and acquired Land Rover in 2000 for $2.68 billion from BMW.

Of the two acquisitions, Jaguar has been the bigger disaster and often a butt of jokes. It was a common joke in the 1990s that Continue Reading…