BackEnduring Symbols | JLR deal will deliver when the tough times end
Enduring Symbols | JLR deal will deliver when the tough times end
PremiumThinking ahead: A Land Rover (left) and Jaguar XF sedan. The Tatas have the know-how to help these brands compete. Photos: Rob Rathbone / Mark Elias / Bloomberg
In December, Tata Motors Ltd went cap in hand to the British government. The company wanted help for its subsidiary Jaguar Land Rover, or JLR, which has been hit badly by the downturn in the global automobile industry. Tata Motors has already pumped in the equivalent of an estimated $1 billion (Rs4,890 crore) of extra cash to help the company remain in production but the government suggested that Tata Motors should—for the time being, at least—continue to draw upon its own resources. Two weeks ago, JLR announced 450 job losses and other cuts to reduce its cost base.
It seems certain, however, that should the crisis deepen, the government would intervene. Lord Kumar Bhattacharyya, who heads the Warwick Manufacturing Group at Warwick University, says: “Directly and indirectly, there are 60,000 employees dependent on Jaguar Land Rover. If the company was allowed to fail, there would be meltdown in the West Midlands—we would have an industrial wasteland."
Other powerful voices have been raised in support of JLR. In early January, Britain’s biggest workers union Unite and key regional newspapers launched a massive campaign to save the company. The newspapers cover the West Midlands and the north-west, where JLR’s main manufacturing plants are located. They have urged their readers to specifically target finance minister Alistair Darling, saying that he must release $1-2 billion to JLR, by signing an online petition on the Downing Street website.
Both Unite and the regional press have emphasized the importance of JLR as an employer and as a source of vital research and development. “Now is the moment for Prime Minister Gordon Brown to be bold and give our car industry the sort of backing already offered to the financial services and construction sectors," says Unite. “A cash-strapped JLR would be forced to rein in its spending on research and development and sit and wait for the recession to blow over. However long that may be, the company will inevitably fall years behind those international companies who have already been helped by their governments," wrote the Birmingham Post.
The Tatas bought JLR from Ford Motor Co. for $2.3 billion in early 2008. Ford had previously spent $5.3 billion on the two brands. At the time, the acquisition was seen as a stunning, if somewhat implausible, coup by the Indian company. Tata Motors was best known as a manufacturer of inexpensive small cars mainly for Indian buyers; the Jaguar and Land Rover brands belong very firmly at the premium end of the global automobile market. And now, with the collapse of sales, the question is: Have the Tatas bought a pup?
The Tatas are investors for the long term—they knew when they bought JLR that they were buying two of the most prestigious brands in the market and that this, ultimately, would give them a huge competitive advantage over their many Asian and US competitors whose brands just cannot match the celebrity status of Jaguar and Land Rover. The Jaguar and Land Rover names occupy a unique place in the affections and loyalty of motorists.
Jaguar, in particular, has had a chequered past: In the 1950s and 1960s, it established itself as a foremost luxury marque with superb performance characteristics. In the 1970s, product quality and reliability plummeted (Americans used to joke that they bought their Jags in pairs: one to drive while the other was in the workshop). Sales followed the product quality spiral downwards but when a new management restored quality, loyalty to the brand returned.
Up to the early 1980s, the Land Rover name had been associated with farming and military vehicles. But it relaunched its brand, drawing on its rugged outdoors heritage and adding a touch of luxury. It also launched the Range Rover and between them, the two brands virtually created the “sports utility vehicle" sector. Ford subsequently bought Jaguar and Land Rover in an attempt to build up a presence in the premium automobile sector, an attempt that failed due to pressure on its “core" mass-market business from Asian competitors.
The Tata group, of course, is massive and well capitalized. Importantly, it owns the Anglo-Dutch steel company Corus Group Plc. and its own automotive division, which last year unveiled Tata Nano—India’s car for the masses. It has the manufacturing skills and know-how which can improve the ecological credentials of both the Jaguar and Land Rover and help them compete powerfully with their European and Japanese rivals. Tata Motors knows that it would take many years to build up its own brands to take on Mercedes, BMW and Lexus. In acquiring Jaguar and Land Rover, it has bought into an established franchise which, with appropriate investment and skilful marketing, should regain its former high standing.
Luxury car brands are among the world’s most potent and enduring status symbols. It seems inappropriate—even vulgar—to talk of status symbols in these straitened times. But in the words of Abraham Lincoln, “This too shall pass." It may take a year or two but when the current cycle has played itself out, the urge for the successful to celebrate their wealth will be as irresistible as ever and at this point, the market for premium automobiles will be the first to benefit. And that will be when Tata sees a handsome return on its investment in Jaguar and Land Rover.
Tom Blackett was brand consultancy firm Interbrand Corp.’s group deputy chairman till 2007. He now works as an independent consultant in London.
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