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Business News/ Opinion / Online-views/  Views | The story of two global acquisitions
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Views | The story of two global acquisitions

Views | The story of two global acquisitions

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As Ratan Tata prepares to step down from the chairmanship of Tata Sons in December, he will leave behind a group with sprawling global operations.

His two biggest global gambles were the leveraged acquisitions of steel maker Corus by Tata Steel in 2007 and car maker Jaguar Land Rover by Tata Motors in 2008. The performance of the two units has diverged, as is evident from the latest financial results they have announced in recent days.

There is one common factor underlying the two stories --- China.

On the other hand, China weighed down on the performance of Corus, which continues to make losses. China is the largest consumer of steel in the world, and its demand for the metal affects steel makers directly through sales and indirectly through price. Weak steel demand in China pushes down steel prices.

The economic crisis in Europe and the building slowdown in China have hit Corus. Many European steelmakers have announced production cuts. Corus has shut down one of its four blast furnaces in Scunthorpe in the UK, and another blast furnace at the site was idled a few years ago on a long-term basis.

The fact that Jaguar Land Rover has been able to cut costs more successfully than Corus has also been an important factor. The Tata Group already has a clear winner as far as Jaguar Land Rover goes, though it seemed to be the more risky gamble when Tata Motors bought it. The Corus acquisition is still not on firm ground, and could emerge as one of the key challenges for Cyrus Mistry when he takes over at the helm of Bombay House, the GHQ of the Tata Group.

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Published: 16 Feb 2012, 01:45 PM IST
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