Ford saying Tata to Jaguar, Land Rover
TEXT OF STORY
KAI RYSSDAL: What we’re going to do, I think, is keep an eye on the big picture. Skip right over the quarterly figures we got today. Jump straight to the totals for 2007. General Motors announced this morning its sales dropped 6 percent last year. Ford tumbled 12 percent. Toyota gained almost 3 percent. That makes the Japanese carmaker the second largest seller of automobiles in this country behind GM. And it puts a sour note on Ford’s turnaround efforts. The big blue oval now accounts for less than 13 percent of the American car market. The company’s doing all it can to get healthy again. Ford said today it might have found a buyer for two of its luxury European brands, Jaguar and Land Rover. The top bidder isn’t a private equity firm. The front runner is a company you might never had heard of: India’s Tata Motors. We asked Marketplace’s Jill Barshay why Ford’s selling, and why Tata.
JILL BARSHAY: Ford is struggling to keep its American auto business afloat. John Casesa is an analyst at Casesa Shapiro Group. He says Ford needs to sell Land Rover and Jaguar to raise cash.
JOHN CASEA: Jaguar was always a problem child. It was acquired in the late 80s, and has generally lost money since Ford has owned it, despite very substantial investment.
Land Rover SUV’s have been doing better. But their appeal might fade as gas prices rise. So why would an Indian business want to take over these British auto headaches?
Casesa: It’s one man’s trash is another man’s treasure. And that’s exactly the situation here.
Casesa says Tata has become rich as India has grown. The company has got more to invest than Ford. Plus it’s buying these brands on the cheap.
Casesa: So this gives Tata relatively low-cost entry into the global auto business with brands that are recognized worldwide.
Global recognition is high on Tata’s agenda. Arvind Subramanian writes about the Indian economy at the Peterson Institute for International Economics. He says Tata is India’s largest auto company. But it’s better known for its low-end vehicles. It’s working on a car priced at $2,500, aimed at India’s masses. Subramanian says Tata wants to aim higher.
Arvind Subramanian: Above all it is about branding itself as a global player, as a global competitor. It signifies the arrival not just of Tata, but more generally of corporate India.
Subramanian says the acquisition of Land Rover and Jaguar are just what Tata needs to boost its ego. Premier hotel chain Orient-Express recently rejected a takeover bid by Tata because the Indian company wasn’t posh enough.
In New York, I’m Jill Barshay for Marketplace.
RYSSDAL: It bears mention here that Ford’s almost certainly going to lose money on this deal. Best guesses are Jaguar and Land Rover are going to fetch maybe $4 billion. Ford paid almost $5 billion for them.
There’s a lot happening in the world. Through it all, Marketplace is here for you.
You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible.
Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.
