In
what is termed as a significant mile-stone for Tata Motors, the company has
entered into a definitive agreement with Ford Motor Company to acquire
British automakers Jaguar and Land Rover. With the transfer of ownership to
Tata Motors expected to close by the end of the next quarter, subject to
applicable regulatory approvals, the total amount to be paid by Tata Motors
for Jaguar and Land Rover upon closing will be approximately US$ 2.3
billion. The Ford Motor Company, at closing, will contribute up to
approximately US$ 600 million to the Jaguar Land Rover pension plans.
As part of the deal, Ford will continue to supply Jaguar and Land Rover for
differing periods with powertrains, stampings and other vehicle components,
in addition to a variety of technologies, such as environmental and platform
technologies. Ford also has committed to provide engineering support,
including research and development, plus information technology, accounting,
and other services. In addition, Ford Motor Credit Company will provide
financing for Jaguar and Land Rover dealers and customers during a
transitional period, which can vary by market, of up to 12 months.
Expressing pleasure over the acquisition of Jaguar and Land Rover, Ratan
Tata, chairman of Tata Sons and Tata Motors, said, "We have enormous
respect for the two brands and will endeavour to preserve and build on their
heritage and competitiveness, keeping their identities intact. We aim to
support their growth, while holding true to our principles of allowing the
management and employees to bring their experience and expertise to bear on
the growth of the business." For Tata Motors, the acquisition of Jaguar
and Land Rover comes at nearly half the price of what Ford paid when it
bought these two brands. Ravi Kant, managing director, Tata Motors, has made
it clear that the company has bought Jaguar and Land Rover as one company
with two brands, which will function as any other 100% subsidiary of Tata
Motors.
After acquisition (Jaguar in 1989 and Land Rover in 2000), Ford has blended
a number of operations making the two brands inseparable. Both the brands
have a number of models in the pipeline and with support from other Ford
businesses. Ford is therefore expected to be involved for sometime to come
even though Tata assumes full control. The two brands, Jaguar and Land
Rover, will have to diligently work towards breaking away from the support
systems of Ford over the years and realign themselves with Tata and its
competitive ways that have come to be admired globally. Tata Motors and its
various auto-related companies, at the other end, are expected to profit
from the technology and experience possessed by Jaguar and Land Rover, which
are not only one of the oldest automakers in Europe but also the ones that
command a large brand following.
Tata Motors is claimed to have a R&D team stationed in the UK, which
works in close co-operation with the ERC at Pune, and the takeover is only
expected to provide further thrust the R&D efforts. The West Midlands is
the home of the UK automotive industry and is at the forefront of research
and development as well as design. Jaguar and Land Rover employ a staff of
15,390 out of which 13,290 are Midlands based. Facilities of the two brands
in Midlands include Gaydon (Warwickshire), Castle Bromwich (Birmingham),
Browns Lane and Whitley (Coventry) and Solihull.
Luxury auto brands, a segment to which both Jaguar and Land Rover belong,
are not known to be volume brands. Their reputation revolves around artistic
craftsmanship and a blend of new technology and traditional craftsmanship.
To retain these qualities and yet boost their competitiveness, Tata Motors,
for various reasons including costs, is expected to transfer an amount of
component sourcing or part manufacturing to India in the future.
From the supplier's point of view, Tata's acquisition of Jaguar and Land
Rover is expected to drive in more business. While Tata Motors is expected
to dial in greater stability to the two brands, boosting their growth, it is
difficult to estimate at this moment the kind of changes that will take
place. While existing suppliers to the two brands are expected to remain
untouched at least for a few years, Tata Motors is likely to transfer an
amount of design, development and component sourcing tasks to India in the
future, while keeping the finer and sophisticated tasks for the European
suppliers to accomplish. This is sure to bring in new innovative synergies
where for example, the Indian supplier does what he is good at and the
European supplier does what he is good at.
Thus, there is a strong possibility of forgings and castings and IT-related
tasks being sourced out of India, while others continue to be sourced from
existing European vendors. For example, Jaguar is known to have used wheels
made in India in the past. Also, steel maker Corus, now part of the Tata
group, is a supplier of sheet steel to the company. Sourcing arrangements
like these are expected to evolve and drive with them new synergies where
Indian suppliers collaborate even more closely with European suppliers. This
is further expected to boost the abilities of the Indian suppliers who are
already exposed to world standards. Again, volumes may not be the criteria
here; it would be technology and precision engineering, something which the
European engineering companies are good at.
Tata Motors has under its wings an active group of component manufacturers
called Tata Auto Comp Systems Ltd (TACO). TACO consists of smaller companies
that have been either acquired or have collaboration with global component
tier suppliers. They are suppliers to Tata's own car and commercial vehicle
business units as well as to other world-class manufacturers like
Volkswagen, Honda and others. A share of business from the two brands is
expected to come the way of TACO group companies in the future and also to a
number of Tata vendors.
With the Jaguar and Land Rover deal taking a new shape over the years as
Ford makes a silent exit, and the two brands realign with Tata to walk down
the self-reliant alley, it is the suppliers in Europe and India that stand
to gain and in ways that are highly innovative and yielding. And in diverse
areas like design, development, engineering and radical manufacture.
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