Tata Pulls Ford Units Into Its Orbit

Date

January 14, 2008

Category

Industry

LONDON — When Ratan Tata visited the home of the designer Ralph Lauren last autumn, the two auto enthusiasts spent much of the time in the garage, admiring Mr. Lauren’s car collection, including the Batmobile-esque 1955 Jaguar XKD.

Now Mr. Tata is poised to take over Jaguar.

Tata Motors said Thursday that it was beginning detailed talks with the Ford Motor Company about buying the Jaguar and Land Rover brands, confirming what investors and analysts in India, Detroit and Britain have anticipated for months. Tata said it intended to reach an agreement over the next few weeks.

For Mr. Tata, who is 70, the takeover will cap 16 years of transforming one of the world’s most diverse and unusual conglomerates, the Tata Group. Through 98 companies, Tata creates and sells products ranging from steel to tea to watches, making the company’s name ubiquitous in India. Under Mr. Tata, the name has started to reverberate around the globe as well.

A string of international deals has diversified Tata to the point where more than half its revenue this year will come from outside India. Tata’s increasingly global outlook is also bolstering the overseas ambitions of other Indian companies.

Going overseas was necessary, Mr. Tata said. In the late 1990s, the group’s truck unit recorded a loss that was the “biggest in Indian history,” he said in a recent interview in Tata’s headquarters in the leafy, historical Colaba district of Mumbai. “We were so dependent on one economy,” he said. “I decided we needed a broader view.”

Since then, Tata has done dozens of deals, buying businesses as diverse as the Tyco Global Network; Daewoo Commercial Vehicles; the Moroccan chemical company Imacid; Tetley Teas; and, most audaciously, the $11.3 billion takeover of the British steel maker Corus last year, a company several times the size of Tata Steel. The group’s 27 listed companies have a market cap of over $70 billion, and the group reported after-tax profit of $2.8 billion in the last fiscal year — a 33 percent increase from the year before, in part because of the Corus acquisition.

The latter deal garnered Mr. Tata some rare criticism, with analysts wondering if he had taken on too much. Corus “came to us, we didn’t seek them out,” Mr. Tata said, and it was a deal he could not pass up. In “one swoop we were in Europe, where we weren’t before,” he said. “That opportunity was going to happen once, and it was not going to happen again.”

The Tata Group is an unusual corporate enterprise. Started in 1868 by Jamsetji Tata, one of India’s dwindling group of Parsis, the group has often seemed to value employees as much as profits (paying laid-off Tata Steel employees for the rest of their lives when the company made cuts, for example), and has prided itself on fair practices, rather than cut-throat maneuvering or paying bribes, a practice still prevalent in some of corporate India.

Indeed, Mr. Tata seems the most unlikely of corporate titans — almost preternaturally humble, unabashedly open about the company’s mistakes and about the fact that he never really wanted to be an industrialist. He studied architecture at Cornell University. After decades of working for the family business, he says he is considering opening a small architecture firm when he retires.

He is a distant relative of the founder — his father was adopted by the wife of one of Jamsetji’s sons. Never married, he lavishes attention on his dogs, writes thank-you notes to employees who do him favors, and is often spied on Sundays driving alone on Marine Drive in Mumbai in one of the several cars he owns.

“None of us observers of the Tatas could have predicted that he would grow and blossom the way he has and be in total charge of the company the way he has,” said R. M. Lala, the author of several books about the family and companies, and a onetime director of the Tata Trust, a charity that finances health care and education projects in India. Other executives and companies may have made more money in India, Mr. Lala said, “but Tata is still the most respected name in Indian industry.”

As company chairman, Mr. Tata has been instrumental in carrying on the family legacy, and turning what was a loosely aligned group of companies that shared one name into a group with seven business lines and centralized management.

It is a business plan Mr. Tata developed in the most unlikely of settings — he spent three months at his mother’s bedside at Memorial Sloan-Kettering Cancer Center in Manhattan in 1981. At the time he was chairman of Tata Industries, then a small part of the group responsible for new ventures. When he was named chairman in 1991, he started reining in some of the company’s independently minded managers and giving the parent company sizable equity stakes in its offspring.

The process was not easy, Mr. Tata wrote with typical candor in a 2003 epilogue to “The Creation of Wealth,” a book about the Tatas.

“If I reflect on what these 10 years have been for me personally, they have been a mixed bag,” he wrote. “There is some satisfaction that I’ve seen the group come together in many ways,” he wrote, but “at the same time there is a sense of frustration at the resistance to change from many of my colleagues that I have seen through this period of time.” All in all, he wrote, “it has been a hard and sometimes unrewarding experience.”

Outsiders do not see it that way, though. The Tata family has been “all about building businesses and being far-sighted about it,” said Tarun Jotwani, the chief executive of Lehman Brothers in India. What Mr. Tata has done very well is be the strategic and ethical head, while providing a “culture of integrity,” Mr. Jotwani said.

Mr. Tata’s reign may come to an end soon — he says he is considering retiring after one of his pet projects, the $2,500 People’s Car, hits showrooms this year. Mr. Tata has no heirs, and there is no likely family member to take over his role, meaning the man who brought the Tata Group to the rest of the world may be the last Tata to run the company.

Original article here