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Tata gives freedom to cruise

August 05, 2008 08:50 IST

Ratan Tata, the 71-year-old Indian industrial patriarch whose Tata group now owns Jaguar and Land Rover, had personal experience of the importance of Jaguar's "heritage"during a visit to the British company in mid-July.

He mentioned that, more than half a century ago, his father had bought one of Jaguar's best-loved early cars, an XK120. This casual remark caused the gears to grind in the Jaguar Daimler Heritage Trust archives. Later Mr Tata - whose enthusiasm for cars extends well beyond Tata Automotive's balance sheet - was presented with his father's order number from within the brown-leaved ledgers.

The link is a sign of continuity in a relationship that is in all other senses pioneering, as the Indian conglomerate takes control of the historic British carmaker. The union between Tata and Jaguar Land Rover, which it bought from Ford in April for $2bn (euro 1.3bn, pound 1bn), appears to be getting off to a well-oiled start.

David Smith, the new permanent chief executive, believes JLR will be faster on its feet under Tata than Ford, where "financial constraints made life much more difficult". Just how much harder was driven home less than 24 hours after Mr Smith was speaking to the Financial Times, with Ford announcing a second-quarter loss of .7bn and a large restructuring of its product lines.

More important to Mr Smith, however, is JLR's opportunity to think as a smaller and more agile business.

"Tata wants us to be autonomous - I've got all the executive authority I need to make both the day-to-day and the long-term executive decisions without having to consult with Ratan (Tata) and Ravi (Kant, Tata Automotive's chief executive), my fellow board members. We can make decisions quickly - that's what will be most different from life at Ford...What we have seen of Tata is that it is a very principled organisation, with corporate social responsibility high on the agenda, but which works differently from the US or European model.

"In terms of governance, we have set up a small strategy board - Ratan, Ravi and me - and we will meet every couple of months and review progress on plans, strategies and future products."

He expects plenty of ideas from Mr Tata on products - Tata's recently launched $2,000 Nano car aimed at motorising India 's less well-off masses was a deeply committed, personal mission for him - and from Mr Kant on cost-effective engineering.

However, he sees no risk that their input might turn out to be intrusive and, he stresses, the day-to-day executive committee set up to run the company will be strictly JLR's - "it will not have any Tata secondees".

That said, he envisages that "there are two or three areas where it would be good to bring in their expertise", such as cutting costs and making use of Tata's extensive information technology resources through its globe-spanning Tata Consultancy Services division, which employs more than 110,000, with 800 client companies.

Some new initiatives are already emerging, including the recruitment of 600 more engineers as well as plans to extend Jaguar's presence upwards into the pound 100,000-plus ($200,000, euro 130,000) market. Although Mr Smith stresses that this will be a gradual process rather than any quick new model launches. Mr Tata has also expressed some interest in reviving the Jaguar-owned Daimler brand and returning Jaguar to the race tracks; but for the moment they remain very much on a wish list.

The situation is helped by Jaguar moving, albeit slowly, out of financial crisis and years of losses. Although both Jaguar and Land Rover now face much harsher market conditions, at least in Europe and North America as they confront soaring fuel prices and much tighter environmental legislation.

In spite of this, Mr Smith predicts that their combined sales this year will be little changed from last year's 286,000, thanks to strong growth in new markets such as China. "Land Rover is on an improving trend while Jaguar is making great strides and getting close (to profitability)." Together they made $650m in pre-tax profit last year and $300m in this year's first quarter (the individual performances of Land Rover and Jaguar are not separated out).

After years of cuts and job losses, Mr Smith indicates that no further large-scale restructuring is in sight. He also suggests the UK components industry's fears of a big shift of sourcing to India are exaggerated. "We have a strong emphasis on the UK automotive sector. It is very important to have local supply," says Mr Smith, who is working with the Society of Motor Manufacturers and Traders and the former Ford design chief Richard Parry-Jones on ways of strengthening the UK supplier base.

"Besides, I'm also a dyed-in-the wool Midlander, and it is really important to me that the business succeeds."

John Griffiths
Source: source