Tata’s likely infusion into Jag, Rover, bad news for sellers
Tata Motors, which bought Jaguar and Land Rover from Ford earlier this year, may now have to pump at least $1 billion into the brands to keep them alive. That’s bad news for U.S. automakers trying to sell brands.
While auto assets up for sale by U.S. automakers were expected to linger for a while, Tata’s rough road with Jag and Land Rover are likely to keep those assets on the block for much longer.
Tata has agreed to inject “tens of millions” of pounds into the company to tide it over while the government mulls a bailout, media reports have said. This is in addition to “hundreds of millions” of working capital provided since Tata bought Jaguar Land Rover from Ford in March.
That’s a lot of cash for any automaker. And it’s a lot of cash for an Indian automaker, which makes most of its profit in Indian rupees.
And that’s bad news for U.S. automakers hoping to lure buyers — some from emerging markets — for various assets. As Detroit’s three surviving automakers seek interest for Volvo, Saab, Viper and Hummer, the most likely buyers are Asian automakers. But Tata has its hands full with the two brands it bought from Ford. And Mahindra & Mahindra, another Indian contender, is bound to be discouraged by Tata’s experience. Investment bankers have said that Chinese automakers were waiting on the sidelines to see how the Tata experience works out.
Hummer and Viper have both been on the block for a few months in auctions that have gone on a lot longer than anyone had anticipated.
Part of the problem is that the finacing markets are bad and it’s tough to get a deal done. But another part of the problem — and a larger one perhaps — is that no one is really interested in buying a U.S. auto asset right now.
U.S. vehicle sales in November plunged 37 percent to their lowest level since 1982. The slowdown has spread to Europe and Asia, and Japanese automaker Toyota this week forecast its first-ever loss, showing that no one is immune to the slowdown in auto sales.
It was already going to be a hard sell for U.S. automakers. Now the likelihood of Tata having to pump hundreds of millions of dollars into brands it bought just a few months ago is going to keep buyers at bay for even longer.