MUMBAI: Tata Motors could face stiff competition and hurdles if it chooses to make a bid for Jaguar and Land Rover, the iconic British brands put on the block by Ford Motor, the troubled American automobile giant. Ford has imposed severe conditions on bidders to protect it from any potential backlash in Britain, where the brands are still popular and where Ford enjoys huge goodwill and market share.
Ford has told the bidders that they can submit their bids if they are not planning any major restructuring post acquisition such as closing down plants or moving production overseas.
Ford is obviously worried that a successful bidder would fire workers or transfer production overseas in a bid to cut costs and realise his returns. Such a move, in Ford’s view, would have severe repercussions and also affect its image in UK where it enjoys a dominant status.
Jaguar has factories in Coventry, Birmingham and Liverpool where it employs about 10,000 and while Land Rover, located in the West Midlands, employs 9,000. Tata Motors runs low-cost operations in Pune and Jamshedpur. Shifting production to the local units is likely to be a part of the Tata Motors’ strategy.
It is not clear if the company has made up its mind to go ahead and submit bids for the two brands.
Tata Motors managing director Ravi Kant did not return calls seeking comment. The company’s spokesperson reiterated the comment made on Wednesday that the company does not wish to comment on speculation.
Land Rover would help enhance Tatas’ profile in the SUV segment and give it a powerful leg up over rivals. However, spurring Land Rover’s sales and performance would depend upon global distribution and marketing skills, which the Tatas clearly lack as of now.
Jaguar is a much more difficult proposition. Ford has struggled to make money on the brand and lost over $700 million last year. Though the brand has a high recall, stiff competition from the likes of Audi and BMW and high costs have dragged down performance significantly.
The Tata group is also facing serious competition in the form of private equity funds such as Cerberus Capital Management, the investment group that purchased the Chrysler Group in May from DaimlerChrysler; Ripplewood Holdings, a group headed by Thomas Stallkamp, a former president of Chrysler; One Equity Partners, another investment firm whose senior partners include Jacques Nasser, the former chief executive of Ford.
All these firms are believed to have made an indicative offer for Land Rover and Jaguar. Nasser was the head of Ford when it bought Land Rover in 2000.
Ford put Land Rover and Jaguar up for sale in a move to reduce debt and focus on reviving sales and profitability in North America. The US car giant made a loss of $12.6 billion last year and ceded position as the second-biggest car firm in the US, in terms of sales, to Toyota.
Industry experts believe that Ford could generate $1.5 billion by selling the two British businesses. Ford has sold off Aston Martin and is understood to be considering auctioning Volvo Cars, the Swedish car group, all high-end marquees which are a part of Ford’s Premier Automotive Group (PAG).
Goldman Sachs, Morgan Stanley and HSBC are understood to be handling the sale. It has been codenamed ‘Project Swift’, and is likely to be completed by this year-end. Analysts said Ford will have to invest money into Jaguar and Land Rover on a continuous basis to stay in the black.
Ford has told the bidders that they can submit their bids if they are not planning any major restructuring post acquisition such as closing down plants or moving production overseas.
Ford is obviously worried that a successful bidder would fire workers or transfer production overseas in a bid to cut costs and realise his returns. Such a move, in Ford’s view, would have severe repercussions and also affect its image in UK where it enjoys a dominant status.
Jaguar has factories in Coventry, Birmingham and Liverpool where it employs about 10,000 and while Land Rover, located in the West Midlands, employs 9,000. Tata Motors runs low-cost operations in Pune and Jamshedpur. Shifting production to the local units is likely to be a part of the Tata Motors’ strategy.
It is not clear if the company has made up its mind to go ahead and submit bids for the two brands.
Tata Motors managing director Ravi Kant did not return calls seeking comment. The company’s spokesperson reiterated the comment made on Wednesday that the company does not wish to comment on speculation.
Land Rover would help enhance Tatas’ profile in the SUV segment and give it a powerful leg up over rivals. However, spurring Land Rover’s sales and performance would depend upon global distribution and marketing skills, which the Tatas clearly lack as of now.
Jaguar is a much more difficult proposition. Ford has struggled to make money on the brand and lost over $700 million last year. Though the brand has a high recall, stiff competition from the likes of Audi and BMW and high costs have dragged down performance significantly.
The Tata group is also facing serious competition in the form of private equity funds such as Cerberus Capital Management, the investment group that purchased the Chrysler Group in May from DaimlerChrysler; Ripplewood Holdings, a group headed by Thomas Stallkamp, a former president of Chrysler; One Equity Partners, another investment firm whose senior partners include Jacques Nasser, the former chief executive of Ford.
All these firms are believed to have made an indicative offer for Land Rover and Jaguar. Nasser was the head of Ford when it bought Land Rover in 2000.
Ford put Land Rover and Jaguar up for sale in a move to reduce debt and focus on reviving sales and profitability in North America. The US car giant made a loss of $12.6 billion last year and ceded position as the second-biggest car firm in the US, in terms of sales, to Toyota.
Industry experts believe that Ford could generate $1.5 billion by selling the two British businesses. Ford has sold off Aston Martin and is understood to be considering auctioning Volvo Cars, the Swedish car group, all high-end marquees which are a part of Ford’s Premier Automotive Group (PAG).
Goldman Sachs, Morgan Stanley and HSBC are understood to be handling the sale. It has been codenamed ‘Project Swift’, and is likely to be completed by this year-end. Analysts said Ford will have to invest money into Jaguar and Land Rover on a continuous basis to stay in the black.