Acquiring jlr provides the Tatas with phenomenal potential benefits, but managing the brands will be tough
Since Tata has pledged that it would neither close plants nor transfer production to a cheaper alternative; volumes will be the only option to offset the labour-product ratio. Tata Motors plans to invest an additional $1 billion to reinvigorate the brands without interfering in the jlr management.
According to some reports, the Tatas may divest more stake in some group companies to finance the acquisition and future endeavors in the direction. Ford has already promised to infuse $600 million towards its share of pension liabilities and Tata is expected to bear its part. However, there are new opportunities, too. As per Overdrive’s Bertrand D’souza, “The company is already selling its Safari and Xenon suvs as part of its assembling operations in Europe and jlr will give Tata more mileage to establish itself as a highly competent automaker in Europe, especially as Tata wants to sell Nano in Europe as well.” Additionally, the strategic importance of the jlr brand platform, technology expertise & sales network will have far reaching advantages. As per news reports, Land Rover has already turned profitable with profits crossing $1 billion in 2007. And it’s anticipated that Jaguar will get rid of the red once its high aspiration xf hits the roads.
Clearly, the deal is an aspirational one to ultimately place the Tatas firmly on the global auto map. But the first challenge for the Tatas is to successfully manage two brands that belong to a genre unknown to it, add to that the fact that it has had to opt out of the lucrative outsourcing model. Once that can be done, the rest will automatically fall in place.
Since Tata has pledged that it would neither close plants nor transfer production to a cheaper alternative; volumes will be the only option to offset the labour-product ratio. Tata Motors plans to invest an additional $1 billion to reinvigorate the brands without interfering in the jlr management.
According to some reports, the Tatas may divest more stake in some group companies to finance the acquisition and future endeavors in the direction. Ford has already promised to infuse $600 million towards its share of pension liabilities and Tata is expected to bear its part. However, there are new opportunities, too. As per Overdrive’s Bertrand D’souza, “The company is already selling its Safari and Xenon suvs as part of its assembling operations in Europe and jlr will give Tata more mileage to establish itself as a highly competent automaker in Europe, especially as Tata wants to sell Nano in Europe as well.” Additionally, the strategic importance of the jlr brand platform, technology expertise & sales network will have far reaching advantages. As per news reports, Land Rover has already turned profitable with profits crossing $1 billion in 2007. And it’s anticipated that Jaguar will get rid of the red once its high aspiration xf hits the roads.
Clearly, the deal is an aspirational one to ultimately place the Tatas firmly on the global auto map. But the first challenge for the Tatas is to successfully manage two brands that belong to a genre unknown to it, add to that the fact that it has had to opt out of the lucrative outsourcing model. Once that can be done, the rest will automatically fall in place.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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