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jury out on potential jaguar and land rover takeover 30/01/2008 The likely takeover of Jaguar and Land Rover is taking the flagship West Midlands-based global car makers into uncharted territory with uncertain consequences.
So says Geraldine Tickle, a partner in Birmingham and London law firm Martineau Johnson and head of the automotive group. .
"It is hard to see the way these businesses will go if the Tata deal goes ahead," said Ms Tickle.
"Tata has some characteristics of a global conglomerate, with many different businesses, including commercial vehicles, in their portfolio but as regards cars, their interests until now seem to have been at the bottom end of the market.
Tata hit the headlines just a few weeks ago with its high profile launch of the 'people's car', a vehicle made largely from recycled plastic, designed for the emerging Indian market and set to retail at a rock bottom price.
The group is the largest business in India, with interests ranging from consumer products through to communications and it reported annual sales of the rupee equivalent of around £15 billion in 2006/7. Now it is planning its first purchase of a Western car group.
"One visible change if the Tata deal goes ahead is that it could mean the end of the road for the Tata Motors European Technology Centre (TMEC), which is a research centre that has been based at Warwick University since 2005. Jaguar and Land Rover have their own facilities. "
Dr Clive Hickman, TMEC's head, has in the past been open about its purpose, being quoted as saying: "If we can transfer technology and knowledge from Europe into the company, Tata Motors can become an unstoppable force."
One conclusion to be drawn from this might be to suggest the shift of manufacture elsewhere might be an option once that technology transfer has been achieved.
But Ms Tickle believes that a wholesale shift of production elsewhere is unlikely. "If the purchase is completed, both businesses will benefit from a skilled workforce and long traditions of excellence. However, there is going to be uncertainty.
"The only real way to improve the position for businesses like Jaguar and Land Rover, apart from removing any uncertainty over their ownership, would be to increase the global reach of the brand, be innovative with new model ranges and rationalise production costs," said Ms Tickle.
There is still an over supply of cars in the developed world and Ms Tickle points out that both these up market brands already have global reputations and distribution networks.
"Both, especially Jaguar, will need substantial investment, so where are the revenue or cost saving benefits that will justify the deal?" she asked.
"This is especially so since Tata is understood to have indicated that it will keep the UK's three plants at Solihull, Castle Bromwich and Halewood open.
"Jaguar and Land Rover together employ around 15,000 people and many more are indirectly dependent through UK suppliers.
"The deal makes sense for Tata if it wants two up market brands and a quick knowledge transfer on up market vehicles. Beyond this, there is uncertainty and I hope we will soon be told more about Tata's detailed plans for these two famous car marques.
"Through its development as a conglomerate and its interest in using in-house facilities, Tata has already been challenging conventional automotive business wisdom, but there will be concerns until the plans become clear. This is what makes it hard to predict what will happen."
For further information please contact James Dilley on
james.dilley@martineau-uk.com
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