Of Tatas and Fords

Tata is looking to take over Land Rover and Jaguar, two of the most prominent names in the luxury car industry. Land Rover used to be a market leader in Off road vehicles, you will still find some old land rovers in Darjeeling, and Deheradun, they use them to drive you up to the sunrise point. And ofcourse, the Land-Rover defender is a big name in defense automobiles.

Jaguar, on the other hand, is a fairly well known name, it is an expensive, shiny, and powerful luxury car. They are serious about the power part, I remember they had a v-12 version out once. In any case, Jags are clearly an icon in the automobile industry.

Compared to Jaguar and Land Rover, Tata has not been in the automotive business for long. You can't really say that they dominate the auto business in India either. THe Indica was a big success, but it was overshadowed by the Hyuandai Santro, the Tata Indigo has never been in the center of the limelight. But, they are a huge group of companies, invested almost everywhere in India, in almost every business. From luxury hotels like Taj, to steel plants, and Television, and what not! The Jaguar-Land Rover deal is certainly going add fair value to Tata's already super-diversified portfolio.

Ford on the other hand, seems to have been on the loosing end for a while now. They have had a lot of trouble making sales and running business here in the US. A lot of layoffs, and a lot of sell-offs. There has been a lot of talk about how Ford had over-invested in multiple Auto models in the past. I.e. they had kept coming with auto lines that were not sufficiently different than what was already in the market, or were targeted to a very small audience.

In contrast, they have been doing great in India, the Ford Icon and the Ford Flair are all but dominating the mid-size (Indian sizes) sedan market. They are blowing away competition in India by offering targeted products with fair pricing. It is interesting to note this difference in operational philosophy and its benefits for Ford.

Anyway, it seems that Ford is doing the right thing by selling of land rover and Jaguar, possibly to Tata. Although I wouldn't personally mind if Mahindra and Mahindra actually won the bid. Although Mahindra has been in the automotive market about the same time Tata has beeen, the Mahindra Scorpio has completely redefined the company's image and demonstrated that Mahindra is capable of great structural change. Although, I am not quiet sure whether Mahindra would leave Jaguar be or try and make changes after acquisition. Tata on the other hand, prefers to just accumulate companies and let them continue on with their own business.

Which raises another interesting point, a point about collective philosophies for companies. There was a time in the sweet sixties when every company wanted a stake in every business. That later gave way to streamlined portfolio optimization. In India though, most big companies seem to throw away conventional wisdom about streamlining and go head on into super - diversifying. Examples are abundant, Reliance, Tata, BPL, UB all are groups of companies that are invested in everything from airlines to cell phone networks. In an emerging market like India, this probably makes sense, if there is money to be made, these companies are making it. In a more mature market like the US, streamlining might be a better option though. Especially with the worries about the subprime lending crisis and a slow down of the US economy.