Why Jag-Land Rover is in good hands under Tata

Published: 26 March 2008

When news first came out that Ford was selling Land Rover, some takeover virgins were wandering the Gaydon headquarters shell-shocked. One wise old hand urged optimism. ‘It’s my fourth sale since I’ve been at Land Rover. And every one seems to get better.’

Our veteran was there when nationalised BL sold out to British Aerospace (in 1988); when BAe sold to BMW (in 1994); when Ford took over Land Rover (in 2000). Now Ford has sold to Tata, India’s biggest privately owned company.

He is right to be optimistic.

Tata - ambition with realism

Tata is a rich, ambitious company with a proven record of taking over milord British companies and boosting success: look what they’ve done with Tetley Tea and Corus (former British Steel). What’s more, they have a reputation for letting management get on with the job. Despite all those Jaguar cock-ups in the Nineties, Jaguar-Land Rover’s current management is clearly heading down the right track and the Tata bosses – self confessed premium car novices – know it. ‘All we ask is that we are left to run our company and they fund new model programmes,’ says current CEO Geoff Polites. ‘We are very confident that Tata will do that.’

New automotive technology, a potential weak link under Tata – especially when battling such techno titans as Mercedes and BMW – seems assured by an agreement with Ford. Longer term Jaguar and Land Rover will also seek to forge new technology relationships, possibly to include the Fiat Group and its Alfa and Maserati brands. (Ratan Tata sits on the Fiat board.)

Employment, in the West Midlands and on Merseyside, has also been safeguarded, at least for the time being. Nobody expects Jaguar-Land Rover to continue long-term with three assembly plants – two would appear adequate. But that painful decision will be made at a later date. It is not affected by the Tata takover. It would have happened anyway, under Ford.

Ford: a painful separation

The big loser in this sale is Ford. When you spend over $5 billion – the joint cost of buying Jaguar (in 1989) and Land Rover – and pump in a few more billions, it hurts to get just $2.3 billion (minus a $600 million ‘pension contribution’). Especially when Jaguar, at last, appears to be heading for break-even after years of red ink (the target is 2009) and when Land Rover last year earned over $1 billion and sales continue to boom. Ford has done a great job with Land Rover, and finally seems to have sorted Jaguar. But it has reaped a poor reward for its efforts.

Tata’s timing, it appears, is perfect. A wealthy, well managed business – sited in one of the world’s fastest growing car markets – should also give our veteran Land Rover employee every confidence that this latest owner may indeed be the best. Hopefully, they will also hang on to their prize for a little longer than BL, BAe, BMW and Ford. Change may sometimes be good. But in the car industry, stability is usually better.

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By Gavin Green

Contributor-in-chief, former editor, anti-weight campaigner, voice of experience