WCA March 2008

Upstart Tata Motors moves closer to acquiring luxury models Jaguar and Land Rover from Ford Ford Motor Co, on 4 th January, named Mumbai-based Tata Motors the preferred bidder for two of the world’s most prestigious car brands. Tata, which beat out a rival Indian auto maker and a US private equity firm, is understood to have entered the final phase of negotiations with Ford over Jaguar and Land Rover, for which no firm timetable was announced. Ford acquired Jaguar in 1989 and Land Rover in 2000 for a total $5.2 billion. These purchases were intended to complement the acquisitions of Aston Martin and Volvo, and all four brands became part of the Detroit auto maker’s Premier Automotive Group. In May 2007, Ford sold Aston Martin to a consortium of British investors for $921 million. While it must be a wrench to Ford to part with Jaguar and Land Rover, as well, industry analysts believe that the three top-shelf acquisitions have never fulfilled the company’s ambitions for them. Ford has said it will hold on to Volvo, and intends to invest to bring the brand upscale. Los Angeles Times staff writer Ken Bensinger considered what the purchase of Jaguar and Land Rover will mean for Tata, which built its first car only a decade ago and is known for its low-priced cars geared to Indian buyers: “The acquisition would be a significant step forward for Tata [whose] control of the two British marques would immediately make it a player in the luxury market. It also would provide the Indian car maker access to far more modern technologies as well as new markets.” Among the other bidders for Jaguar and Land Rover were Indian auto maker Mahindra & Mahindra and One Equity Partners, a New York private equity firm that makes investments for JPMorgan Chase. Ford has not provided information on the bidding for the two brands, but outside reports said the bids were in the $1.5-billion to $2-billion range. Tata’s advance to the forefront of negotiations for Jaguar and Land Rover set Mr Bensinger to musing on the curious aspects of some cross-border acquisitions. He wrote: “Tata has recently garnered attention for its plans to release a sub-$3,000 economy car. What synergies exist between the world’s least expensive econobox and $75,000-plus sports cars and luxury sports cars that top $100,000 remains to be seen.” Hyundai Motor Co said on 4 th January that it expects to increase its sales in the United States, its largest overseas market, by about 10% this year. Citing the American consumer’s economic uncertainty for its failure to meet last year’s goals there, Hyundai said it expects to sell 515,000 vehicles in the US in 2008, up from 467,009 in 2007. South Korea’s largest auto maker had lowered its 2007 US sales target 8.1% to 510,000 in September, partly as a result of the belt-tightening apparently stemming from defaults on high-risk housing loans in the world’s largest economy. Hyundai also said it was activating a previously announced plan to build its first factory in South America, and was looking for a site in Brazil. The annual production capacity of the plant is to be 100,000 vehicles. Hyundai affiliate Kia Motors – No 2 in South Korea – is also projecting a better Hyundai and Kia see higher US sales in 2008

Over the forecast period, China is projected to have the world’s fastest-growing market, making it the largest market outside of the US for new commercial airplanes. In other news of Boeing, the company said that the South Korean budget airline Jeju Air Co had ordered five 737-800 planes, valued at $370 million at list prices, from the American aircraft manufacturer. In a 1 st January statement, Boeing said it had recorded orders for more than 4,400 of its 737s, and has unfilled orders on the books for more than 1,900 planes worth more than $140 billion at current list prices. Toyota overtakes Ford as second to General Motors in US sales Breaking Ford’s 75-year hold on the No 2 position in the US, Toyota Motor Corp in 2007 sold 48,226 more cars and trucks there than Ford. According to figures released on 3 rd January by the Japanese auto maker, its US sales were up 3% last year. Ford, with sales off 12%, said 2007 marks the first time since 1931 that Ford Motor Co was not in second place to General Motors Corp in US sales. Someone who has a perhaps unique perspective on the reversal is Jim Farley, who recently became Ford’s global marketing chief after a career at Toyota. Taking a constructive view of the results for 2007, Mr Farley said the new numbers would not effect any changes in Ford’s plan for recovery. “In fact, it actually accelerates the way we’re running the business,” Farley told Associated Press auto writer Dee-Ann Durbin. “It accentuates the difference between how we’re running the business and how our competitors are running the business. It requires us to stick to the plan, no doubt. But it also requires us to really accelerate the development of new products.” Mr Farley noted that Ford had some winners in 2007, notably with its Edge and Lincoln MKX crossover models. Ford crossovers grew 62% in the year, far outpacing the industry average of 17%. As for Toyota, the company has been typically reticent about both of its spectacular advances in 2007: over Ford in the US, and its probable overtaking of GM as world’s top producing auto maker. (GM has estimated its sales total for 2007 at 9.3 million; Toyota, 9.36 million.) But this is not to say that Toyota is thinking of reining in its vaulting ambition. The Japanese auto giant said it expects to sell 9.85 million vehicles worldwide this year, up from a previous target of 9.8 million. Toyota does not expect to improve its performance in the US in 2008, given the persistent housing slump and problems deriving from defaults on sub-prime mortgage loans. However, even here there are consolations for the company, which has a devoted and rock-solid American following. The US consumer may pass on the purchase of a new car this year, but only from economic constraint – not from any ‘patriotic’ fervour of the kind seen when Japanese auto makers penetrated the US market in the 1980s. ❖ Automotive

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Wire & Cable ASIA – March/April 2008