Specifically to your comments about managing this acquisition as a private equity would. First of all, extremely bad timing to try to pull off a private equity approach. The idea of buying the company, leveraging it with debt, paying the new owners handsome dividends and then letting the management of the acquired company faced with running it with extreme discipline (because of all the debt and hence the interest payments that required) ARE OVER. PERIOD.

Second of all, cutting costs in a business model which is heavily dependent on commodity prices will be an extremely challenging if not impossible endeavor at least in the current environment. Of course, I have the benefit of hindsight which probably the management at Tata group did not. But just wanted to add my two cents about the potential approaches that you outlined.

Just to clarify, there is potentially nothing wrong with your ideas but since your last post, the market reality has changed quite significantly.

What TM would do well is perhaps bring an outside perspective to cut the operational and material costs at Jag and LR . while it may sound stupid, this could be done in many ways. Did u know that Mercedes cars till recently were painted in the same complex where Indica’s get done up?…..

And perhaps cut material costs by leveraging group synergies. Corus’s product portfolio at the time of acquisition consisted of steel that is used up by aircrafts and high end cars.

Jaguar - Land Rover combined is a big brand, but our records shouldnot just stop at this. Lamborghini was sometime back owned by someone from south east Asia. Did it dilute the brand for you?

The automobile industry is now at a phase where its depicting signs of maturity yet it is changing very fast. Latest technologies are transcending car segments at an exponential pace. ABS was till sometime ago meant only for luxury cars, today a small car in India has an ABS option.
Given the ambitions of Tata Motors, its technological prowesses are a big constraints on its future plans. Very broadly Tata Motors plays in 2 segments…costlier SUVs and cheap cars.

Its small and mid size car business is well strategized that way. It has very intelligently formed a JV with Fiat (( considered to be the best small car manufacturer)) for its car business. Ratan Tata is on the board of Fiat too. And of couse Tata has an advantage in this front in terms of its ability to make cars cheap.

The SUV segment or the higher car segment(which it needs to enter…in India even Honda City is considered a luxury car)is the one where Tata needed something like an acquisition to latch on to todays latest technologies. The Jaguar - LR deal more than anything else gives Tata great R&D skills. Tata may now have the potential to do a Nano in the higher car segment for emerging countries with these acquired technology skills. And this is important, if you see the car segments which are growing the most year on year in India, these would be increasingly the more upmarket segments.

At the same time, I would assume Tata will make a deliberate attempt to keep away as far as possible from Jag -LR brands….so as to not diminish their appeal, but at the same time arouse that confidence in a Tata customer that somewhere deep inside his/her tata car is Jag-LR technology.

Besides, there are other ways to learn from established luxury carmakers some of which could have included a joint-venture or some sort of partnership to jointly develop a new vehicle (by perhaps funding more of the development). Spending $2.3 billion to buy a brand that has significant competition in the luxury market, is losing money - is a questionable deal. Besides, if Tata cannot bring a rationalisation plan to the table because they are promising that the jobs will be kept, then there is not much hope in terms of turning the band around itself.

It remains to be seen what the advantage of the brand in itself will be for tata - perhaps they can pull some sort of integration between the luxury brand and tata that Lenovo has been able to pull with ThinkPad.

Also, there is potentially an argument to be made about whether this is the best timing for a deal when the United States and perhaps some other parts of the world are heading into a consumer led recession.

Ford Sr. left the company in a position which we can only envy. High cash reserves to take on any market change, amazing innovation and designs to stun the pants off any competitors( Ford was the first factory in the world to do the end-to end integration) and a huge tank of high quality talent.

But Ford-II screwed it up. Ego and bad management destroyed his company. He fired people because they came up with good ideas and effectively stalled any design growth.

Today, Ford has to sell off its gems to keep itself afloat. the desperation in Ford camps is so high that Ford-III has said, I will relinquish my position of CEO to anyone who believes he can turn around the company.
And all those pumping of billions in R&D has just started recently, which was not there even 8 years back.So I believe effectively Ford is in a fire fighting mode, which makes sense why Ford is selling it off.

Mrityunjoy,
As for the Daewoo case, indeed it was a coup of sorts both from the aspect of acquisition and issue of integration. I am yet to find out if the Hyundai segment has started making a positive contribution to the balance sheet.

Today, Toyota has come a long way, and the American companies are now copying the techniques of Toyota. But ever wondered how many decades it took Toyota to reach this place?

Mastering and improving technology is not easy. And therefore, it makes perfect strategic sense to acquire cutting-edge technology if it is available.

Ford has pumped-in billions of R&D dollars into J-LR, and this is bearing fruit now. J-LR have the latest technologies. This is the perfect time to acquire these brands, and by doing this, the Tatas have cut the steep learning curve.

Amazing strategic thinking….

But Soham, precisely why the Daewoo Truck integration is a more important yardstick. Again Daewoo trucks and Jaguar and Landrover are different in terms of brands, but Daewoo is an auto manufacturing company and its successful integration will stand Tatas in good stead as the begin to integrate Jaguar and Landrover.

Also the the Daewoo case is an integration of complementary brands, which is important for the Jaguar case.

About payoffs on R&D investment with Warwick, I have no idea. But at least Tata has access to good advice.

Mritiunjoy Mohanty
IIM Calcutta

Secondly I was pleasantly surprised to know, Warwick Univ has a partnership with Tata, yet has it given anything back. I am curious.
But again, research can be sometimes a moneysink, but then you have to handle it properly…