By Jim Mateja on March 25, 2008
Business as usual.
That's the general reaction to news that Tata Motors of India has completed the purchase of Jaguar and Land Rover from Ford Motor Co. for $2.3 billion — less than both the $2.5 billion that Ford paid for Jaguar and the $2.7 billion it paid for Land Rover.
Both company officials and dealers quickly downplayed any negative effects of the sale to Tata, saying the only change is in ownership.
Jaguar and Land Rover said dealers will continue to sell, service and warranty existing products, and product lineups are expected to grow rather than dwindle now that a company with deep pockets has taken over from a company that lost $2.7 billion last year.
"The parties are still undergoing due diligence, and the final agreement will be worked out sometime in June, but it's business as usual," said Jaguar/Land Rover spokesman Tim Watson.
Tata chairman Ratan Tata has said his company intends to grow the brands and the image and not tinker with them.
"If anything changes, we'll have to live with it, but I don't expect any changes," said Bill Knauz, a Lake Bluff, Ill., Land Rover dealer. "We'll have the same vehicles to sell and eventually some new ones, plus Ford has reached an agreement to supply Tata with parts and components (including engines). Maybe if they said they aren't going to build this or that, then they would muddy the waters, but we haven't heard about any of that happening."
Howard Orloff Imports in Chicago sells Jaguar and Land Rover cars, as well as Volvo, a luxury division Ford didn't sell.
"I see this as a positive opportunity," said Dave Sacco, general sales manager at Orloff. "Tata is in a variety of businesses and is the General Electric of India. They have big money to invest in growing the product."
Analysts were also positive about the news.
"Tata understands these are premium luxury brands and customers expect first-class treatment, and there's no reason for that to change," said Joe Phillippi, who is head of his own automotive consulting firm. Tata is known mostly for building trucks and extremely low-cost cars that don't meet U.S. safety standards. "Tata wouldn't even try to radically change things. Their challenge now is to keep up with the competition — Mercedes, Lexus and BMW — in bringing new product to market. One reason they enlisted Ford to supply it with technology as well as engines is that it would cost Tata about $1 billion to bring out one new-from-the-ground-up model and about $500 million for one new-from-the-ground-up engine."
Essentially, working with Ford means Tata can add newer models quickly and at less cost, a formula Ford would like to adopt as well.