Posted by: John Elliott | November 24, 2008

Is it time to re-examine Tata’s Jaguar and Land-Rover purchase?

It has been reported over the weekend that Tata Motors is asking the British government for a £1bn loan to rescue Jaguar and Land Rover (JLR) from financial collapse because of falling demand and the company’s problems raising finance to cover debt.

The story originated in The Sunday Times (UK) and has this morning been reported world-wide, though without confirmation (or denial) by the company, which has only confirmed it is involved in industry talks with the government.

We have been here before. As I pointed out when Tata – headed by chairman Ratan Tata – bought the two companies for $2.3bn earlier this year, it was buying into 40 years of troubles. In 1968 British Leyland was formed by the UK government to rescue ailing car companies – including Jaguar and Rover – and most have since collapsed.

[Added Dec 10 ’08: See http://www.nytimes.com/2008/11/18/business/economy/18car.html?_r=2&em=&pagewanted=all for more details of the history, including  how the British government had committed £11bn at today’s prices by the 1970s to save BL, and Ford spent another $10bn later before it sold Jaguar to Tata]

I was highly sceptical last year about Tata’s purchase and was viciously attacked by readers, mostly overseas Indians (NRIs) living in America, for saying Jaguar in particular might be a bad fit.

It is not the fault of Tata management that the world is in financial crisis. Other far larger car companies – notably GM and Ford – are in far worse straights.

But the appeal for help does underline how Tata has over-stretched itself with JLR, and in buying the Corus steel company for £11.3bn. Now the market value of Tata Motors – and Tata Consultancy Services, the group’s cash cow – have fallen sharply.

This seems therefore to be a good time for a reappraisal of whether Jaguar and Land Rover are worth rescuing – and whether Tata (which has its own problems in India with falling demand and its delayed low-cost Nano car project) is the right company to do it.

The British government should surely analyse that before it makes a decision, reportedly expected in two weeks’ time.

Should it be using British taxpayers’ money to bail out the Indian owner of two companies that several other owners have failed to turn round in the past 40 years?


Responses

  1. Would be interesting if you’d re-examine again, two years later.
    Thanks
    Keep up the good work
    Robert

  2. Many NRIs tend to see India though rose tinted glasses. It’s rather unsurprising to see them attack anyone (particularly a westerner) who is critical of anything they see as “Indian pride.”


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