I was making three points in my earlier post (http://indianeconomy.org/2008/03/29/opportunities-from-big-brand-acquisitions/#comment-265372). First of all, at first glance, there is little synergies between the R&D priorities of a global luxury car brand with an Economy segment manufacturer such as Tata. Second of all, even if there are some needs like a diesel injection technology, these needs can be fulfilled by licensing or perhaps buying a black box component as part of a joint venture. Third of all, I questioned the timing of the deal given an impending recession.

That was in April 2008.

Today, four months later, it seems like the third point has eclipsed the other two. Let me first say that I agree with Mritiunjoy that for the joint-venture to succeed, both parties need to bring something to the table. But is outright purchase the best way to get access to innovation & technology? I would not agree to that as a blanket statement. However, as a management consultant, I am more of a fact driven person and I am sure that we can find business examples within the automobile sector that depict both successes and failures in technology transfers, so I believe a fact driven position can be taken for each side of the argument.

Now, has Tata group being extremely strategic in this purchase? With the benefit of hindsight - I would say NO. Facts: US auto sales tumbled 18% in June compared to 2007. Everybody is suffering including Toyota whose sales fell 21 per cent. (http://online.wsj.com/article/SB121484164201916119.html). There is absolutely no doubt that with half of the global economy steering down an ugly recession (as per a report out today from Goldman Sachs), consumption of discretionary high ticket items are such as automobiles will continue to suffer.

Now, I know what some of you are thinking. But please don’t tell me that a “luxury consumer is immune to such slowdowns”. Recent analysis of residents worth more than $1.5 million indicates (http://econompicdata.blogspot.com/2008/08/more-millionaires-in-florida-than-in.html) that a significant portion of wealth is invested in real estate. For example, 40% of the assets for California millionaires are invested in real estate. Guess what!! These so-called buyers of luxury car brands are probably not gone out to buy the second or third land rover because a significant portion of their wealth in real estate is down 20% to 30% with no bottom in site.

So, time will tell if the biggest challenge for Tata is integration or the fact that they just made a questionable acquisition at an extremely bad time!!!

That said, as an Indian, I wish them all the best and sincerely hope that they succeed

I am not against indian companies making acquisitions. It’s the fact that they all see the need to do things like acquiring or entering new markets after seeing their peers. aka “collective stupidity”.

Say what you want to say about the Indica and the Indigo but one look at the roads and you will see that they are “made for the market”. How many Honda Civics do you see outside your window? Then count how many Accords? Indicas and Indigos are not very high on any international car lists but in India these are cars made for the particular demands of this market.

The lessons that Tata has learned in this market will help them flog developed markets once they have the products in place. This is where the JLR acquisitions come in. The Tatas are vertically integrated in the area and if there are any companies capable of the pulling it off it is the Tatas.

I don’t understand your grouse against Indian companies making acquisitions. Its been going on for years. When Cisco bought Webex is it because of mental bankruptcy?

Daimler-Chrysler marriage resulted in a cheap ass version of Mercedes hatchback selling for 23k or something. I won’t even imagine what’ll happen to Jag/Landrover after the sarkaari looking management team of Tatas gets on the ground

Recent wave of foreign acquisitions and mergers are only examples of mental bankruptcy that Indian family based business tycoons are facing. They all look at each other before “foraying” into organized retail, LBOs, Telecom service, Insurance business…and rest of the time they are collecting all kinds of stupid awards and debating on future on india

Buying Jag is a vain folly. These days I get a yawn when I see a, well, what is it? Is it a Jag?

Time will tell whether TML manages to create any value out of it.