By Dipankar De Sarkar, IANS
London : Top Tata Motors executives began negotiations with their counterparts from Ford Friday even as the Indian carmaker faced a credit ratings downgrade linked to its offer to buy out British marques Jaguar and Land Rover.
The talks, which could run into February, began amid reports in London that Ford may retain a stake in the business.
The Times newspaper reported that Ford was likely to continue to supply engines and components for the cars – already a key demand of the British Ford workers’ union Relate.
In addition, the paper said, it may want to strike a deal similar to the one it struck with the Gulf-based consortium that bought Aston Martin.
In Mumbai, meanwhile, the global credit ratings agency Moody’s said it has placed Tata Motors Ltd (TML) – currently on a speculative Ba1 corporate family rating – on review for a possible downgrade should the US carmakers Ford give it the go-ahead to take over Jaguar and Land Rover.
“Should TML proceed with the transaction and acquire these two businesses, it will face considerable execution and integration challenges,” Moody’s Vice President Elizabeth Allen said.
“Furthermore, while TML enjoys a strong position primarily in the low-to-mid-end vehicle segments in India and in some developing markets, the acquisition of the Jaguar and Land Rover brands will expose the company to the luxury product category as well as to broader geographies; these are areas in which TML lacks experience.
“Moody’s, therefore, believes such a transaction would materially increase the business risk profile of TML,” Allen added.
Tata Motors emerged as the frontrunner in a three-way race for the British luxury brands Thursday when owners Ford Motor Co said it was focussing on talks with the $28-billion Tatas, India’s largest industrial house with 98 companies in its stable.
The other two bidders are Indian carmakers Mahindra and Mahindra of India, which has since opted out, and US buyout specialists One Equity.
The Moody’s review is to focus on the funding structure of the potential transaction and its overall impact on TML’s operating and financial profiles. This would include plans to address the potential integration challenges and Moody’s assessment of the substantial funding arrangements involved.
Also Friday, a newspaper based in the region that is also home to the Jaguar headquarters and design centre issued an appeal for jobs to stay there, rather than be outsourced.
“Keep Coventry as the home of Jaguar,” the Coventry Telegraph said in an editorial that it described as an “impassion plea to the company’s potential new owners.”
“Today executives of Tata, the preferred bidder for Jaguar, begin a negotiating process, setting out their vision of how and where the firm should develop and will present a blueprint for its future.
“Jaguar is Coventry. We urge its new owners to make sure it stays that way,” the paper said.
Paying tributes to the skilled workforce that has made Jaguar a global brand, the paper said Jaguar had also “touched the lives of tens of thousands of families in Coventry and Warwickshire.”
But it said its “plea to keep the city at the heart of the company” was based on business logic rather than sentiment or nostalgia.
“The skills and dedication of generations of local workers have contributed to the global success of this prestigious motor company. And researchers and designers at Coventry’s Whitley centre have proved, with the creation of the fantastic new Jaguar XF, that they hold the key to the future,” the Coventry Telegraph added.