F-Type back on again under Tata

Lightweight sports car is ‘central plank’ of investment programme

Within just 24 hours of Ford selling Aston Martin to Kuwaiti investors, the new owners had opened the financial floodgates for Aston to build a long-sought design centre and launch other programmes not possible under cash-strapped Ford. Are we about to see the same thing following the $2.3bn deal under which Ford has sold Jaguar and Land Rover to India’s giant industrial group, Tata?

	This is the one car, above all, that Callum most wants to design

On the surface, it all looks pretty good. Ratan Tata, the group’s charismatic, 71-year-old chairman, gave a number of assurances after the signing ceremony. No, Tata was not going to uproot the whole shooting match and cart it off to India (in reality, that was never an issue – the terms of the deal with Ford preclude it). No, Tata had no intention of going into loss-making Jaguar like a bull in a china shop to turn it round more quickly. Yes, it was deeply respectful of both brands and would do nothing to compromise their ‘Britishness’. Yes, design chief Ian Callum and senior colleagues would be staying on. And yes, most important of all, Tata was going to underwrite an ambitious five-year investment programme for both brands.

For Callum in particular, such commitment represents the answer to his most fervent prayer. There is one car, above all, that he most wants to design and have Jaguar build: a truly lightweight, aluminium-bodied two-seater invoking the spirit of the E-type in a manner that the much-lauded but bigger and heavier XK range has failed to do. While there is much speculation, and rather fewer hard facts, about the content of the five-year investment programme, this spiritual successor to the ‘E’, so sources tell me, forms a central plank. Assorted prototypes for a so-called F-type have come and gone throughout Ford’s ownership. This time, it should be for real.

Or will it?

A few health warnings need to be issued around this deal.
One is that it is not yet actually done; nor will it be until final EU and other regulatory approvals have been given. That will take us into early June – by when the fears of a global credit crunch and financial meltdown may well have been realised, with all the dire effects implicit for the world’s luxury car markets.

Another is that, unlike the Kuwaitis, Tata is no bottomless money pit. Indeed, its own investors have been developing an increasingly serious case of the jitters over what they view as a risky venture, and one for which they fear Tata is taking on a worryingly large burden of debt. It is planning to raise $3bn in bridging loans in addition to $1bn in new equity to finance the takeover – and, just as Ford did to its increasing financial detriment, Tata faces the reality of having to plough in billions more in the long term to keep Jaguar and Land Rover competitive on the global stage and hope sales rise enough and costs fall enough to provide payback. In that respect, while Tata has already made much play of Jaguar and Land Rover together being profitable, the fact remains inescapable that Jaguar is still piling up losses. The challenges seen ahead have already led to Tata’s credit rating being cut.

In recognition of all this, Tata’s shares have fallen by about 15 per cent since it first became a clear front- runner for Jaguar and Land Rover in summer of last year.

There are, however, positives. For a start, Ford is chipping in $600m to Jaguar’s and Land Rover’s pension funds and will continue supplying engines and other major parts, as well as help dealers make the transition. More importantly for the medium and longer term, it is also to provide engineering and research and development support – no small consideration given the size of the technological task confronting car makers in terms of carbon dioxide reduction and other environmental issues.

There is also the all-new XJ large saloon, still on course for launch in late 2009/early 2010 and about which Callum waxes positively lyrical in his insistence that, if the world thought XK and XF were good, then it will regard the futuristic-looking XJ as a BMW and Mercedes-lunching stunner.

Yet the fact remains that the global financial turmoil which has set in since the start of the year appears set to turn luxury car markets flaky at disturbing speed, with respected auto industry forecasters such as Global Outlook predicting that it’s going to get worse before it gets better. The turmoil began in the US and has yet to impact seriously on European markets, although the market overall has started to falter.

But the US is the luxury car makers’ single most valuable market and it is already plunging. Up to the end of last year, luxury car sales were still riding high. By March, Porsche’s sales had collapsed by almost a half, to 1298 compared with 2401 in March last year. So had Bentley’s – down from 449 to 258. Mercedes’ SL and SLK sales were similarly little more than half the previous March’s levels.

And Jaguar? Worryingly for such a recent and relatively landmark ‘new generation’ model, the XK’s sales more than halved, to 247 from 506. XJ sales, too, have halved. While Jaguar is retreating from the X-type market as a matter as policy, if it were not for the new XF, selling 1161 in its first month, the picture for Jaguar would look bleak indeed. Even in Europe, its sales in the opening months of 2008 were down, year on year, by almost exactly one-third.
For sure, Land Rover is enjoying record sales and is still turning a buck, although the consolidation of its accounts within Ford until now has made it difficult to see precisely how much. The new LRX ‘small’ Landie should also provide a strong fightback against anti-SUV bias.

But without question, it’s going to be tough. ‘They couldn’t have asked for a better new owner,’ says Kumar Bhattacharyya, head of Warwick University’s Warwick Manufacturing Group. ‘Tata is a very benevolent company; they are not going to be looking for a quick buck.’

Probably just as well, then.