Paul Horrell, Consulting Editor, Top Gear has a view that Tatas are very strong financially but it doesn’t have the required technological expertise to directly feed into the kind of things that Jaguar and Land Rover do.

Excerpts from the exclusive interview with Paul Horrell:

Q: What do you make of this deal, is USD 2.3 billion the right amount you would reckon?

A: It is clearly a very major deal in regular business terms but actually in automotive business terms, it is not a particularly big deal. That only amounts to about 1/6th of the quantity of money that the Ford Motor company lost during 2006. So it won’t in itself write Ford Motor company’s financial problems and it certainly by the same token, big mouthful for Tata Motors to take on and Jaguar/Land Rover will essentially have to be viewed as an independent company within the Tata Group.

Tatas obviously are very strong financially but it doesn’t have the required technological expertise to directly feed into the kind of things that Jaguar and Land Rover do other than a really major global automotive company. Very few potential buyers for Jaguar and Land Rover would have that kind of expertise.

Q: What do you think would Tata Motors bring to the table as far as the future or defining the future for both these brands? You said they don’t have the technological expertise but at least from a managerial expertise point of view, they do run a fairly large company back here in India?

A: Absolutely, but I suspect that it is basically financial management and they simply have a lot of money and they have proven themselves are capable of running all sorts of corporations but in terms of automotive expertise, they don’t yet have the track record. Yes, they can run factories and build trucks and so on but for Jaguar and Land Rover there are many other vital components in terms of management that I am afraid Tata and indeed very few group in the world would have in terms of, if you like the brand management, simply knowing what kind of cars Jaguar and Land Rover need to produce into the future knowing how to distribute?

 How to find customers and how to market? What to do about the dealerships and the after sales, all those of sorts of issues have to be tackled by Tatas. Tata will have to let them get on with it and take the companies into the future, that’s why I say that essentially they will have bought an independent entity and they will have to a large extent leave Jaguar and Land Rover to operate independently.               

Q: In the long haul, would this be a good bet?

A: Tata have shown that they have a lot of financial muscle. One of the things they will have shown to Ford before being allowed to proceed with this deal is that they would commit themselves to the kind of investment required to run any sort of premium car company or any car company at all in the future.

There are gigantic challenges coming up for all the world car companies, in terms of investment in new safety technologies and particularly in new environmental technology. That certainly applies to companies that are making rather thirsty cars that Jaguar/Land Rover make.

Fuel consumption technology would power trains - hybrid power trains, new diesel engines and all sorts of new technologies into the future making the vehicles more lightweight. This sort of thing is extremely expensive technology. Tata will have to commit itself to that sort of stuff for several years to come. So, it is not just this USD 2.3 billion investment that they are making right now. It is an investment of hundreds of millions of dollars every year in engineering from now on.                            

Q: The press statement given out says that Ford will continue to supply different components to both Jaguar and Land Rover. What do you think will be nature of this relationship going forward, now that they have sold these two brands out?

A: Any supplier pertaining to the relationship at that level has to be very close. We are talking about components that are absolutely intrinsic to cars, engines, transmissions, axles and things that cannot just be changed in a moment. It is very important to the continuing health of Jaguar and Land Rover that they are able to do a good, long range planning for the supplies of those sorts of things.

I mean it costs millions of dollars to reengineer a car and to put a different engine in. So, if Jaguar were to suddenly decide that it was going to buy its engines from someone else other than Ford or Ford decided that it couldn't continue to supply a certain engine, it would have to give Jaguar probably a two-year's notice in order for Jaguar to change its engineering of the vehicle in order to incorporate a new engine.

So, those sorts of relationships have to be very clear. They have to be very cordial, open, and entail a lot of long range planning. Also, Ford clearly has to be realistic. It cannot just jack up prices because that would make the manufacturer of the vehicles uneconomical.

Q: What happens now in terms of regulatory approvals?

A: I am afraid I don't know. That is really not my field of expertise. There are things like the employment legislation and pension things that we have talked about. That is a very complex field; you would have to talk to a legal expert over that I am afraid.