TURN OF THE WHEEL March 27, 2008Posted by wmmbb in South Asia.
They might not be the brightest jewels in the shop window, but who would have thought sixty years ago that Jaguar and Land Rover would be owned by an Indian Company. I wonder whether Tata have made a wise buy, but I suppose they know what they are doing, and they would not be doing it for symbolic reasons.
The BBC has the story on the how the wheel of fate has turned:
Ford has been forced to sell the two companies, based at Solihull and Castle Bromwich in the West Midlands and Halewood on Merseyside, in order to concentrate on its loss-making core US car business, which it hopes to turn around in the next two years.
The $2.3bn price tag is about half the amount Ford originally paid for the marques, leading some analysts to argue that the purchase was a mistake.
“How can you call it anything else?” said Erich Merkle, an auto expert for US consulting company IRN.
“You have to cut your losses at some point. It’s been draining them of cash and resources.”
Maybe I am underestimating the car market now available in India, or even the comparative skill advantage of Indian management. In that case, there are some car companies in Australia ripe for investment!
I do not really need to have disclaimer here about my lack of knowledge – that will never stop me (more is the pity). I guess that this purchase can be seen from Tata’s in terms of its strategic benefits. It is a bargain. They are buying the companies for half the price that Ford paid. They get access to brands, to markets, to technology and to strategic alliances with Ford. On the other hand, for example, Tom Peters thinks that mergers almost never work for several reasons, including organizational cultural incompatibilities.