GENEVA, Switzerland - The Geneva Motor Show press days came and went without the expected news that India's Tata had agreed to buy Jaguar and Land Rover from Ford.

 

But if and when the deal is finalized the question will still remain; why would any company want to buy a serial value destroyer like Jaguar and barely profitable Land Rover, which carry the additional baggage of being gas guzzlers in a world enacting savage new fuel economy rules?

 

When it became clear last year that financially ailing Ford was serious about dumping Jaguar and Land Rover, one automotive publication summed it up like this: "Home for clawless cat wanted. Ford may be about to throw limping Jaguar and Land Rover to the wolves."

 

The wide range of estimates of the money such a sale would raise -- from Merrill Lynch's $1.3 billion to Citigroup's $8 billion -- reflected the difficulty potential investors had in valuing these two flawed British icons. Some thought Ford would actually have to hand over cash to finally see the back of these two storied marques.

 

Jaguar's financial record is chronic.

 

Since buying luxury sports sedan maker Jaguar for $2.5 billion in 1989, Ford has lost close to $10 billion, including the purchase price. Land Rover, which makes big SUVs like the Range Rover and Discovery, and the smaller LR2, is thought to be profitable at the moment, but not making enough money to finance a product renewal program.

Move it all to India

 

Krish Bhaskar, who heads the Motor Industry Research Unit (MIRU), based in Nice, France, thinks there is only one way for the deal to add up, and that is to switch production to India to take advantage of much lower costs.

 

"Everything will go to India, otherwise it doesn't make any sense. It's pointless to keep production in the U.K., just look at the pound, dollar and euro (exchange rates)," Bhaskar said.

 

Tata chairman Ratan Tata was quoted as saying in interviews at the Geneva show that he had no plans to "Indianize" Jaguar and Land Rover and would leave the management largely intact.

 

"We are not looking for a company in which we make a drastic change (in management)," Tata told the Financial Times.

 

The British media and trade unions have interpreted this as meaning that everything will remain more or less the same in terms of management and production.

Makes no sense to produce for U.S. in Europe

 

Bhaskar is not so sure.

 

"It doesn't make sense to produce in Europe for the U.S. any more. It has to move to India," Bhaskar said.

 

Tom Donnelly, professor of automotive business at Coventry Business School, has a much more upbeat view on the possible deal, and thinks it will lead to a center of engineering excellence in the British Midlands.

 

"Tata has been talking about opening an R&D centre in the Midlands, although nothing has been signed and sealed, but if agreed this could mean a high technology cluster for the auto industry here, and with Formula One near here as well, this could be great for Loughborough, Birmingham, Warwick and Coventry Universities," Donnelly said.

 

Donnelly though it made sense for Tata.

 

"Tata wants to be a global player and wants to make vehicles in virtually every segment. It would be silly for it to develop its own luxury brand; what credibility would that have? Like GM with Saab, you buy the real thing," Donnelly said.

Flawed business plans

 

Jaguar and to a lesser extent Land Rover have been the victims of flawed business plans over the years, Donnelly said.

 

During the Ford years of ownership Jaguar was plagued by derivative design and a failure to develop new markets. Even when cars like the flagship XJ sedan were flaunting the latest aluminum body technology, the body designs were dull.

 

The little "X" type sedan was supposed to lead Jaguar into higher volume sales and to compete with the likes of the BMW "3" Series. In 2001, when launching the "X" type, Jaguar talked of sales reaching 150,000 a year, with overall sales reaching 200,000, maybe 300,000 a year. Last year Jaguar's overall sales came in at 60,485 -- 19 percent lower than in 2006 -- although that reflected the run-out of the "S" type, now replaced by the XF.

 

Jaguar fell into the habit of constantly having to catch up with developments from Audi, Mercedes, BMW and now Lexus, rather than leading the way. Even the new XF, now being launched around the world, appears to have dated engines and chassis compared with the German and Japanese leaders.

Chronically overweight

 

Land Rover has done many things right, but the Range Rover and its slightly smaller Discovery sibling are chronically overweight with sector-trailing fuel consumption at a time when carbon dioxide emissions are headline news. Last year Land Rover sales rose 18 percent to about 225,000. The long-range target had been 250,000, according to Donnelly.

 

Dr. Peter Wells, Reader at the Cardiff Business School, said the Jaguar "X" Type was seen as a rebadged Ford Mondeo and was wrong for the brand, but he does believe the future under Tata has promise.

 

"Both have strong brands and great potential. Jaguar is moving back into cutting-edge styling (with the XF) and there's lots of scope. Tata may have the imagination to think of different ways forward, and the future lies as much in the East as here in the West with developing markets like India and China. In these countries Jaguar and Land Rover have strong reputations and brand recognition. Tata is a very strong, powerful and innovative company with a lot of resources behind it," Wells said.

Indian software skills, British engineering

 

Professor Ferdinand Dudenhoeffer, managing director of Bochum, Germany based B&D Forecast, said Ford never had a chance with Jaguar and Land Rover because it came from the old car world, and had no experience running premium brands. Things might be different with Tata.

 

"I think the mixture of British engineering and Indian software skills will generate a turnaround," Dudenhoeffer said.

 

MIRU's Bhaskar believes that if Tata buys Jaguar and Land Rover it might well be a long-term success, but it will mean the end of any large- scale British-owned automotive business.

 

"It has to move to India, and that means the direct workforce of about 22,000 goes and the wider supplier industry involves about 200,000. The knock-on effect will kill U.K. suppliers, and kill the U.K-owned automotive industry. This is the killer blow," said Bhaskar.

From: auto viewpoint/industry news