Famous names find hope in India

Mar 27 2008 by Alistair Houghton, Liverpool Daily Post

Halewood’s immediate prospects seem secure. Alistair Houghton takes a look ahead

IT WAS the worst-kept secret in the motoring world – but now Tata has confirmed it is buying Jaguar and Land Rover, workers and analysts are desperate to discover just what the future holds for these much-loved British brands.

The Indian motor giant has been pursuing the brands for months and yesterday Jaguar Land Rover (JLR) said it predicted a “bright and successful future” under Tata Motors.

The £1.15bn deal has been welcomed by trade union Unite as it will secure the future of Jaguar and Land Rover manufacturing in the UK, at least for the medium term. Unite says the deal also protects jobs at Ford suppliers such as Getrag, which employs hundreds of people at another Halewood plant.

Tata is clear that it will look to invest in the brands to help them grow. It has also committed itself to JLR’s existing business plan for the next five years, and therefore to the company’s 16,000-plus UK staff.

The Halewood plant, which employs some 2,200 people, builds Freelander 2 vehicles for Land Rover and X-Type cars for Jaguar.

While Land Rover is seeing increasing sales success, last year selling a record 226,395 vehicles, Jaguar has been a loss-maker for many years. Tata will still have its work cut out turning its fortunes around.

But if it does decide to invest in new models then it could be good news for Halewood, as the plant’s spare capacity and reputation for efficiency and quality means it would be well-placed to win the right to build those vehicles.

Ford had been looking to sell JLR in a bid to stem its rising losses, and has accepted just 40% of what it originally paid for the two brands.

Yesterday Tata said it had entered a “definitive agreement” with Ford to buy JLR and its brands for £1.15bn. The final deal will be completed by the middle of the year.

Tata chairman Ratan Tata said: “We have enormous respect for the two brands and will endeavour to preserve and build on their heritage and competitiveness, keeping their identities intact.

“We aim to support their growth, while holding true to our principles of allowing the management and employees to bring their experience and expertise to bear on the growth of the business.”

Geoff Polites, chief executive officer at JLR, said: “We feel confident that we can forge a strong working relationship with our new parent company.”

Unite’s Merseyside-born joint general secretary Tony Woodley, who led the campaign to save the Halewood plant from closure in the 1990s, broadly welcomed the deal, saying it secured the future of these “quintessentially British iconic brands” and the UK factories that build them.

He said he was pleased at Tata’s commitment to maintain workers’ existing terms and conditions and also welcomed Ford’s commitment to invest £300m in the Jaguar Land Rover pension fund.

Mr Woodley admitted he was disappointed Ford had decided to sell the business but said if a sale had to happen, Tata was the best option thanks to its industrial expertise.

He said: “Land Rover is a profitable company and we are expecting Jaguar to return to profit. It’s a big disappointment that Ford, because of its problems in North America, decided to sell the companies.

“But Tata is the best option. It could have been a private equity firm with a slash, burn and run policy.

“What’s been secured here is that Tata will back the existing business plan at Jaguar Land Rover which enables manufacturing at Halewood for five years, but then also the investment in product development and the long-term agreement from Tata to source gearboxes from Getrag. That’s good news for Halewood and for Merseyside.”

Cllr Graham Morgan, portfolio holder for regeneration at Knowsley Council, said: “This deal is absolutely fantastic news for the workforce here and for the whole of Knowsley, Merseyside and the wider region.

“I’m confident for the long-term because there’s a first-class workforce producing quality products. We’ve come a long way from the dark days of the 80s and 90s when there was a huge question mark over the plant. The way the workforce has turned the plant round gives me great confidence.”

THIS deal secures the short and medium-term future of JLR’s UK manufacturing as Tata has committed to the com-pany’s current production plans.

But in the long-term, some say Tata may have to source components from abroad as it looks to trim costs.

Leading Asian motor industry analyst Ashvin Chotai, of Intelligence Automotive Asia in London, said: “I cannot see any time realistically in the future when manufacturing will all move to India. The markets are here, the suppliers are here and Tata has got its hands full in India with a lot of other things.”

Mr Chotai said Indian analysts were concerned about whether Tata Motors, best known for its commercial vehicles and its ongoing Nano project to build the world’s cheapest car, was overstretching itself with the JLR deal.

Tata has also had to borrow more than £1.5bn to fund the deal and develop its Nano project, and borrowing costs have risen thanks to the impact of the “credit crunch” and the US housing market crisis.

Mr Chotai said Tata would have a tough job turning around Jaguar as the brand had fallen so far behind rivals such as BMW under Ford’s ownership.

The Halewood-built X-Type was designed by Ford to take on market leaders such as the BMW 3-Series, but failed to meet sales expectations and faced criticism for its use of Ford Mondeo components.

Mr Chotai said: “The premium luxury car market is very competitive and dominated by the Germans. Jaguar has lost a lot of years. I’m not too optimistic about Jaguar –it’s a tough call.

“But Tata will be working with the existing management at JLR. That management will have a lot of views about what Ford has done wrong. If Tata can learn from that and act on that then they’ve got some chance.”

OPINION: PAGE 10

alistairhoughton