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Indian summer for Jaguar and Land Rover

Dealers should be upbeat about Jaguar and Land Rover’s future under new owner Tata.

Mark Lavery, chief executive of top 25 AM100 group Cambria Automotive which has five Jaguar outlets, said Ford was right to sell the businesses. Sorting out Jaguar would have been a distraction from its bigger problems in North America, whereas Tata can give the brands better focus.

Lavery believes Ford could not make Jaguar a success because it tried to take on BMW, Audi and Mercedes-Benz at the volume game.

He added: "I don’t see Tata doing that. Jaguar is a niche sports brand which makes beautiful cars. I think Tata will aim for Jaguar to be more of a rival to Porsche, with small volumes of 100,000 cars which dealers can make a good return on."

He added: “It couldn’t be a better time to be a Jaguar dealer. There’s some fantastic product coming."

Lavery has previewed the 2010 replacement for the XJ, code-named X351, which is “absolutely stunning, out of this world”. He predicted room in the Jaguar range for a small sports car below the XK and an edgier sports car to rival Porsche’s 911.

After months of negotiations, Tata finally ann-ounced on March 26 that it has signed an agreement to buy Jaguar and Land Rover for £1.15 billion. The acquisition from Ford, which paid more than twice that figure when it bought the pair, is expected to be completed by June, subject to regulatory approval.

Ford has not retained a stake in the two brands. It has pledged to continue supplying powertrains, body stampings and some other components, and it will contribute around £300m into the Jaguar Land Rover pension plans. Back office functions, such as dealer finance provision, will also continue for a transition period.

Tata has committed to maintaining current work-force levels at Jaguar and Land Rover’s assembly plants for the next three years after accepting the two carmakers’ five-year business plans.

Chairman Ratan Tata said his group respects the working practices at the two companies and wants to “nurture and grow them”.

It is unlikely that their UK retail networks will suffer, as Tata will be keen to build on sales. Don Hume, director of corporate affairs at Jaguar and Land Rover, said: “We don’t anticipate any major changes in the way the business operates.”

Debasis Ray, head of corporate affairs for Tata Motors, told AM that it would continue to support Land Rover and Jaguar’s “strong distribution network”.

“We will be investing in and supporting Jaguar Land Rover’s line-up of new products; its desire to grow where there are market opportunities; and continue to support its strong distribution network, suppliers and customers around the globe.”

Analysts are concerned about Tata’s acquisition of Ford’s luxury brands, according to reports in the financial media. Tata Motor’s stock has fallen by 13% since it was announced as a bidder for Jaguar and Land Rover last July. Investors are said to be worried about the loss-making Jaguar, the US luxury market downturn and the uneasy fit for the luxury brands with Tata’s current stable of low cost vehicles for global markets.

Tony Woodley, joint general secretary of Unite, the union, said that if Jaguar Land Rover had to be sold then Tata was the best option. “We would have much preferred Ford to keep the companies in the family, so to speak, especially with Land Rover being so profitable. But with the commitments Tata has given to the future of Jaguar Land Rover, we’re obviously pleased it is in the game,” he said.

Jaguar and Land Rover employ 16,000 people in the UK, 12,000 of them in the West Midlands.

Tata views

In the long term, many motor industry observers predict some change to the brands’ manufacturing.

Roy Kishor, senior automotive partner at corporate advisory specialist Kroll, said examining Tata’s other UK operations, Corus and Tetley, indicates it is very committed to a UK presence.

He told AM: “We’ll see Tata create manufacturing in India, but this will be additional capacity created to satisfy Asian demand.”

Kishor believed the Defender 4x4 would be most suited to Indian production, as it is low volume and relatively unsophisticated in comparison with Land Rover’s other premium vehicles.

Having just witnessed Bentley take a stake in HR Owen (see p8), Kishor did not believe Tata would follow suit and take a shareholding in Pendragon, which has 56 Jaguar and Land Rover dealerships, according to Sewells Who Owns Who.

Tata is tipped to invest up to £1 billion more into the brands in the next five years to honour Ford’s business plans and produce two new models for each marque.

Automotive analyst Michael Wynn-Williams said Tata must carefully plan the future for both brands.

He added: “Advance orders for the new XF suggest that it might actually have sorted itself out. Now Tata must fund the other models. The XJ and XK appear obsolete alongside the XF and need reworking.

"The X-Type had originally been charged with bulking up the sales and sustaining a comprehensive dealer network. This model has now been withdrawn from the crucial American market and it is generally thought that there will be no replacement.

"Without a high volume model the sales network, and the adjoining service facilities, may not be economic.

"Land Rover seems to be in ruder health with sales growing impressively. However, its heavy models put it on the wrong side of the environmental equation and it may have to reconsider the fundamentals of its vehicle designs."

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