The Ambitious Plan Behind the Jaguar-Land Rover Purchase

Tata Group aims to become a big global player in autos and other major industries.

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Expect to hear a lot more from Tata Group, the big Indian conglomerate that just bought Jaguar and Land Rover from Ford.

The sale of two iconic luxury brands to an Indian automaker known for commercial trucks and the diminutive Nano—a $2,500 "world car" that's 2 feet shorter than a Mini Cooper—might seem surprising. But the $2.3 billion deal has been in the works for months, and it fits clearly into an ambitious expansion plan meant to make Tata one of the world's leading brands in a number of marquee industries.

Tata is a sprawling, privately owned firm headquartered in Bombay, with about $30 billion in revenue—roughly the size of Alcoa or Northrop Grumman. With nearly 100 companies under its roof, Tata has been characterized as the General Electric of India—only kinder and gentler. While pledging aggressive growth, Chairman Ratan Tata has said it won't happen "over everybody's dead bodies," and the company generally avoids GE-style tactics like routine layoffs and hostile takeovers.

After India liberalized its economy in the early 1990s, Tata spent a decade transforming itself from a bloated monolith that enjoyed monopolies throughout India into a leaner global competitor. By 2000, the company had developed an aggressive strategy to grow around the world, through acquisitions and new footholds in lucrative markets. Though its portfolio includes an eclectic mix of companies—including hotels, telecom providers, and the Tetley tea brand—its biggest moneymakers are steel, information technology, and automobiles, which account for 90 percent of the firm's revenue.

In a recent interview, Alan Rosling, a Tata executive director in charge of "internationalization," explained that Tata's biggest priority is building out those top three businesses. He ticked off Tata's standing—and its ambition—in all three:

Tata Consultancy Services, an IT firm that competes with huge multinationals like IBM and Electronic Data Services, is No. 11 in its industry. By 2010, the goal is for TCS to be in the top 10. That, he hopes, will come from strong growth in the United States and other mature economies, as corporations increasingly outsource IT work to firms that can do it cheaper.

Tata Steel recently went from being the 56th-largest steel company in the world to the sixth, following a $12 billion acquisition last year. "We're not satisfied with No. 6," Rosling insists. That makes more acquisitions possible.

Tata Motors, by comparison, is tiny. Without Jaguar and Land Rover, it makes only about 250,000 passenger cars a year, largely for the Indian market. Folding in the two niche brands will more than double that and offer a toehold in Europe and the United States. But Tata will still be a small player.

The Nano, which goes on sale this year, could eventually raise Tata's automotive sales by a million cars per year, mostly in developing countries with looser consumer, safety, and environmental standards than western markets. But Tata doesn't plan to try exporting cheap home-grown products to Europe and the United States, the way some Chinese automakers say they will. "I don't think we have a product yet that's ready for the U.S.," Rosling says. Except, of course, for the luxury nameplates Tata now owns—and any others it may acquire.


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  • Rick Newman

    Rick Newman is the author of Rebounders: How Winners Pivot From Setback to Success and the co-author of two other books. Follow him on Twitter or e-mail him at rnewman@usnews.com.

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