The Hindu Business Line : Tata had better slow down

My mind was buffeted by mixed feelings when I read all the raving write-ups on the latest acquisition of Jaguar and Land Rover (JLR) by Tata Motors from Ford Motor Company for $2.3 billion in cash. The price to be paid, subject to government clearances, includes the consideration for the brands, plants, equipment and intellectual property rights.

“Tatas have done us proud”, chortled the Minister of Commerce and Industry, Mr Kamal Nath, leading the chorus of encomiums.

Mr Anand Mahindra of Mahindra & Mahindra, a bidder at the initial lap who soon left the race, said that the acquisition “will make the world sit up and take notice of India’s growing prominence in the global automotive arena”.

JLR is Tata’s 30th acquisition accounting cumulatively for a total outlay of close to $18 billion. The acquisitions have ranged as far afield as Eight o’clock Coffee, Tetley Tea, Daewoo Motors, Corus Steel and Ritz Carlton Hotel.

This very fact of variegated conquests has been taken as a grand testimony to the Tata Group’s resilience, imagination, ‘can-do’ spirit and professional mettle, in tune with the resurgent India marching unstoppably ahead sweeping everything before it.

The deal has also been hailed as a demonstration of the capability of India Inc to thrive at a time when the rest of the world, especially the US, seems heading for a slump.

Flies in the ointment

It may well be all that. But the editor of Auto Monitor, Mr D. D.Sharma, does not seem to be so sure, especially in the light of the loss of $15 billion incurred by the Ford Motor Company on JLR within the last two years.

“The Tatas must have done their homework” he said guardedly, “on how to turn around these brands, may be, by low cost sourcing from Brazil or China, or by increasing the market penetration. We have to wait and see”.

His caution is understandable. Of the original five bidders, four dropped out over a period of six months leaving Tata Motors in the field.

There was a hiccup when the dealers of JLR opposed the sale to a company from the Third World, as that, in their view, would water down the reputation and value of the brands.

There are a few other flies in the ointment which, one hopes, the Tatas have factored into their ‘homework’.

Since it is proposed to make JLR a subsidiary, its assets and liabilities will not be reflected in the balance-sheet of Tata Motors.

However, not just the participants to the negotiations and the shareholders of the respective companies, but also the people of the country would be concerned with the source and terms of financing, as a safeguard against the Government having to bail out the company in case of a mishap. The Chief Financial Officer has been vague on this matter.

Any turnaround is bound to involve restructuring, right sizing and revamping; Tata Motors will lose a good measure of manoeuvrability on this account if it is constrained, as it apparently is, to retain the entire workforce of 15,000 and the CEO on an as-is-where-is basis.

The Managing Director, Mr Ravi Kant, says that there was a great deal of enthusiasm to do things in an independent manner. He, of all persons, ought to know that such euphoria can be short-lived, especially when there is going to be a cultural divide in the management of human resources.

Finally, I feel the Tatas are stretching themselves too far out too fast. They had better slow down. India cannot afford to let its star performer stumble, unleashing a tsunami of demoralisation all round.

We can only hope that the Tatas know what they are doing and wish them all success

B. S. RAGHAVAN

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