TURN OF THE WHEEL March 27, 2008
Posted by wmmbb in South Asia.trackback
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!
Postscript:
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.
[...] has some interesting news for Jaguar fans. Is this latest example of economic globalisation the coup de grace for British [...]
I like cars and the history of the firms. A really good Australian author is Tony Davies, whose knowledge and acerbic wit make a terrific read. (Read ‘Lemon!’ and ‘Extra Lemon’). I can’t remember which British firm he was talking about when he said that, following a very bad investment, the company had crashed. “Once again, pilot error seemed to be solely responsible,” he concluded.
And so it has been more or less since WWII.
Volkswagen makes Rolls Royces and Lamborghinis. Why shouldn’t Tata make Jags. I reckon, though, it IS about bragging rights, which are important in motoring and in the industry. As an investment, well, it’s got to be twice as good (or half as bad) as the deal Ford got.
Thanks for the comment 2 tanners.
You have got me thinking about this subject more.
It occur to me that as a family run company, strategic investment can be more idiosyncratic. If their PR is to be believed they would be the sort of company that might be in the further development of non-petrol engines.
So it seems to me that when compared to government investment, such as that of Dubai, Singapore, or China, corporate investment can have a different character.