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Why Tata Makes Sense* UPDATED

March 6, 2012 in Editorial, News

UPDATE: Chairman Ratan Tata himself denies the report. I think that’s pretty damn definitive. This will go down as yet another reason why I’m disheartened in the Saab sale.

GENEVA — Tata Motors Ltd. Chairman Ratan Tata Tuesday denied a news report that the Indian car maker has made a bid for the assets of failed Swedish auto firm Saab AB.

“No we didn’t,” he said on the margins of the motor show. “But I know another Indian company has: Mahindra.”

Indian newspaper Financial Express reported earlier in the day that Tata had made a $350 million bid for Saab’s assets.

Its rival Mahindra & Mahindra Ltd. has confirmed its interest.

As you can read below, The Indian Express has indicated that Tata has placed a bid for Saab’s assets. I heard that they were snooping around a few weeks ago from a very reliable person who would be in a position to know, but promised the source I’d keep my mouth shut (even to the crew, but they might have picked up on my hints when I started telling them how much I enjoyed the Evoque test drive). At the time I just kept my fingers crossed and hoped that it would come to fruition. This is the first public confirmation of this fact, and I’m waiting for confirmation from other sources to make sure it’s true. I’m cautiously optimistic. (Now I know why they’re not returning my email as the story has been shot down).

Quite frankly, this whole bankruptcy process has been depressing. I haven’t posted much because there hasn’t been much for me to hope for. While it’s fun to speculate over potential owners, none of them have really been a home run to me, so I’ve kept my nose out of most of it. A fact that has been clear as the bankruptcy process unfolded is that each party is coming at Saab’s assets with their own interests at mind first, not Saab’s or the faithful Saab community. No one is buying a brand out of the goodness of their heart or because they think Saab is a great going interest on its own, they want to use the people and resources of the company to leverage their own company, and Saab the brand is a bonus. So in the eyes of the Saab fan, what would be the perfect owner given these conditions? What potential owner would actually have the most incentive to keep Saab Swedish and build cars that we would consider true to the heritage of the company? Youngman’s interests have been clear from day one– their business model has been amalgamating whatever parts and resources they can license to create their own brand. Saab would be a crown jewel for them, but more the means to an end to their own ambitions in China. That German automaker would actually be a very good fit and find incredible efficiencies no doubt, as was studied by Swade in an excellent post. But as has been pointed out, is there really room for Saab in that portfolio? Wouldn’t Saab take the back seat to BMW at every turn? Mahindra and Mahindra has vast resources and seems to have good intentions to make it as a global automaker, and Saab has key pieces of that puzzle that will help them get there. It appears they’re looking to follow their countrymen at Tata who led by example with their acquisition of Jaguar Land Rover (JLR), and I hope if they’re successful that they do just that. But Tata themselves? Now that’s something, and here’s why.

As most know, Tata bought Jaguar and Land Rover in 2008 from the remnants of Ford’s Premium Auto Group, which once included Volvo and Aston Martin. Ford had developed an all new V8 engine and aluminum architecture, invested billions to modernize Jaguar, and inherited an entirely reworked Range Rover platform from BMW who they themselves purchased Land Rover from a few years before. One could compare Jaguar and Saab’s sales as a tale of what to and what not to do when taking over a car company. Tata was an invisible hand that swept in and capitalized the launch of the new XF and XJ for Jaguar, making sure to maintain and even strengthen the brand’s ties to England. While many xenophobic auto writers feared that the company would cost cut their way to a new product range, they used their vast industrial wealth (which includes huge steel manufacturing operations) to refocus and modernize the brand. They took design risks with lead stylist Peter Horbury in charge, all of which paid off. Jaguar sales have skyrocketed under Tata management, and Land Rover isn’t far behind.

One criticism Saab has received in the last decade is how many concept cars were released, yet how few elements of those concepts ever made it to reality. As new owners, Tata kept the strategy that Jaguar executives had already put into motion under Ford’s ownership, that bold concepts would be followed by near identical as possible production versions. With their C-XF concept, they shaped their current range first with the XF and then front styling of the XJ, shaking up the staid image of Jaguar. Their Land Rover division went a step further, after they floated the LRX concept, having received incredibly positive reaction, they went about making the production version as close to spec as possible. Since the Audi TT I haven’t seen a car more closely resemble a radical concept, and the reaction in the press and in sales has been tremendous. As I’ve shouted for years here on this blog in comments, if only Saab could have built the original 9-3X concept, we might have seen a similar effect. Alas, GM wasn’t having any of that.

Why people don’t understand the idea that a small but well engineered premium crossover is a good idea is beyond me, even some of our own commenters don’t get it. Don’t knock the Evoque until you’ve driven it, besides the obvious nods to Land Rover design heritage, it feels every bit as Saaby with it’s 2.0T engine as you’d want, much more so than a 9-4X. Even Swade himself noted that at the 9-4X reveal in Los Angeles, the nearby Evoque stole all the attention. Its magnetic damping system works every bit as well as the Saab Drivesense and does a fine job making it feel more like a car than an SUV. For my money, with a few tweaks, the 2002 9-3X concept would work every bit as a 2015 model as it would have a 2004. Slap that body on an Evoque, and take some pressure off the line in Halewood where the workers can’t keep up with demand. You don’t even need to change the engine, Saab engineers would certainly have fun tweaking the 2.0T Ford EcoBoost engine, and it might even be able to be engineered to work in the current 9-3.

It’s pretty clear that Saab would get a lot out of Tata, but what does Tata get out of Saab? Some have suggested that Tata might be looking to spin off JLR in order to divest themselves of the future investment necessary to compete. This may inevitably be true, but Saab offers them an opportunity to capitalize on development of the very pieces of the puzzle they’re missing: a smaller architecture and hybrid/turbo tech. What really gets me excited is the direction that they seem to be focusing JLR since their stewardship began. Like all automakers, they’ve been more and more interested in reduced emissions and higher performance, and their recent initiatives into a plug-in Land Rover and their latest Jaguar concepts (more on those in a bit) prove that they need a reliable and focused hybrid platform in order to get these initiatives off the ground. They’ve invested heavily in these departments, but Saab engineering staff is a critical and cheap pickup in the larger scheme of development that they could use to their advantage. Saab as we know has extensive research already devoted into hybrid technology in the works, whether in conjunction with eAAM or in their own back office. The FWD Phoenix platform is designed with efficiency in mind and has the added bonus of being scalable to give Jaguar the small sedan platform they’ve been trying to get off the ground (ignore the rendering, it’s an artist’s impression not real). Were Tata to acquire Saab, it would fast forward their development and give them a crucial piece of IP (even though it still needs some finishing) to expand their lineup without starting from scratch. Unlike BMW, they need much more help developing a FWD platform. Jaguar and Land Rover’s headquarters in England are near enough to Trollhättan to allow engineering staff to overlap while keeping Saab engineers focused on special projects and the Saab range. And as far as brands go, Jaguar and Land Rover aim for a much different demographic than Saab with much deeper pockets. Saab fills the lower and overlap the middle end for Tata while allowing their other brands to remain true to themselves. If Tata has ambitions to become the next Toyota with their own line of domestic cars in India, the Phoenix platform would be like striking a gold mine.

Perhaps the most important two examples of why I trust Tata are the Jaguar C-X75 and C-X16 concepts from the past year, both designed and produced under Tata’s watch. Both are hybrids, and both are to my eyes incredibly sexy. If you haven’t seen them in the flesh at a major autoshow, you’re missing out. Incredibly, one operates in nearly identical ways to the Hi-Po Saab I advocated in Swade’s contest earlier last year. Basically the C-X16 uses its electric motors in much the same way Saab’s eXWD system operates, giving an extra torque boost when necessary, but in their case for extra performance. Think of them like a green nitrous button for insane passing power. Jaguar has every intent to build the car, but development of such a system for production could prove to be a costly endeavor. While they hope to develop a system from the C-X75 concept, by purchasing Saab, they could fast forward their track. Seeing that Saab already has the association with such technology, that could bypass many of the technical hurdles of getting such an ECU and system incorporated into their own range.

Jaguar has already announced it will built a limited run of the C-X75 supercar with partner Williams F1, which in Saab terms is like having built the Aero-X. Can you imagine an owner that would do this? They’re even going so far as to fit actual turbine engines to a few of them.

The main reason I love the idea of Tata ownership is because of their exemplary stewardship and of Jaguar and Land Rover, notably their thoughtful risktaking through design but more importantly their fundamental commitment to keeping the cars rooted in their home country, the UK. They understand the value of brand, and also have shown how to take advantage of market conditions, efficiencies, and design constraints to position themsevles perfectly into their own niches. Another reason I’d love this to work is because before I fell in love with Saab, I was a Jaguar nut. I took my driver’s exam in an XJ6, and will always remember my first experiences falling in love with car culture sitting illegally in the back of my dad’s old XJS convertible while cruising at highway speed. Their idiosyncratic and offbeat heritage is the closest to Saab’s, and they have always represented an alternative to the mainstream choice in their class.

So all of this is really just building a case as to why I see Tata as the prime candidate at this point. Whether or not it actually happens is anyone’s guess, the administrators hold the cards and we’re all left scratching our heads powerless to the outcome. I’m actually thankful for that, and hope that they remain as tight lipped as they’ve been with regards to the eventual winner. I want the deal buttoned up solid before they peep. In the meantime, there’s at least one person at JLR (not to mention Carl Peter Forster who remains on Tata’s board) rooting for Saab’s survival and rebirth, and we have nothing but positive sentiment for him at SU. I for one hope he finally gets the chance to market Saab the way it deserves.

46 responses to Why Tata Makes Sense* UPDATED

  1. Jeff
    An interesting post but I have one observation – there has been only one report of TATA so far – so it is obviously not a widespread theory…

    Also I must draw your attention to a report in today’s DI where VM himself states that North Street Capital didn’t exist – I remember pointing this out at the time – only for you and the rest of the cult to shout me down for being anti-Saab (which I am not).

    • VM got burned bad, as did NSC. They certainly exist, they have a board, and have access capital, but both parties had huge egos which took a beating in the process. They definitely didn’t have the resources like the mega conglomerates bidding on Saab’s assets do. It’s no wonder VM was quoted as such.

      I’m posting this not so much as a confirmation of the bid (of which I’m still waiting to hear back from other sources), more as speculation of what might be were it true. A potential bid was hinted at to me by someone who would be in an extremely solid position to know in a conversation in early February. I can’t go into it further than that, sorry. I myself am on pins and needles hoping that the bid was in fact submitted. As we find out more we’ll let you know.

      • NSC was a Mickey-Mouse operation being run out of a virtual office by a guy with a highly questionable past – to my knowledge they didn’t even engage in any due diligence so I fail to see how they lost any money at all… I and many others could see this at the time but we were shouted down – I just wish sometimes that the rose tinted spectacles of the crew would be replaced by a magnifying glass.

        But moving on: I throughly enjoyed your TATA/Jaguar speculation : )

      • I don’t see how NSC got burned. It seems more likely that they lied about their financial position–to Saab, to Spyker, to Victor Muller, to SU, and to all of the press that conducted interviews in which Alex Mascioli stated that NSC had the funds to purchase Spyker and even Saab itself if necessary. Yet despite an agreement in the fall that would have immediately injected funds into Saab none came and Saab went back to the drawing board with Youngman and Pang Da.

  2. I would like that, but ” bid for SAAB’s assets” doesn’t mean the entire company, right ?

    • Who else is reading about the new Jaguar XF Sportbrake at the Geneva auto show and *thinking* what-could-have-been with the stillborn NG 9-5 SportCombi…such a shame (sad face).

      This new Jag is a stunner but how much is this sucker gonna cost 65K?

  3. Ohh, a post by Jeff! Great! Bin missin you as an article writer here. Welcome back! Although you probably never was gone ;-)

  4. Bought my first Saab in 1973 from Dave Moore’s Liverpool Mayfield dealership, (long gone), situated about 3 miles from Ford’s Halewood plant. I would never have thought that Saab might ultimately end-up associated with that plant. In 1973 it would have been a disasterous prospect, but now, part of JLR? Bring it on!

  5. Tata, “a european manifacture” or Youngman …. whatever it is I can not influence this but one can always wish.

    After reading your post it sounds like Tata could be a very good owner for Saab. My biggest concern lies with Youngman where I’m convinced that SAAB is about 10 years from now not a brand anymore,personal opinion.

    The “european manifacture” would obviously be good but as you also say SAAB would be in the “back seat” when it comes future and technology.

    Why not Tata ? where it can build up a collaboration with Jaguar and Land Rover … why not … it’s like I said .. unfortunately not me who decides but one can hope. Why not any advitisement earlyer …why this silent from Tata…is it just confucing rumors.

    Time passes and it hurts in the heart .. when will this is be over so I can sleep again …..

    BTW, thx for a intresting reading, and sorry for my broken english :)

  6. Great post. I too think this would be a perfect acquisition. Tata already have a proven track record and Saab can also help with the Jaguar brand as mentioned here. Tata all the way!

  7. So………. latest news is that Tata chairman has denied the press report.

    • Everything I’ve ever read in the press about something of which I had personal knowledge has been wrong.
      By extension, just about everything in the main media press is garbage.

  8. I was disapointed that Tata were not in the frame from the start as SAAB would fit perfectly with JLR. It would allow Tata to offer a much broader range of vehcles. I do hope these new rumours are correct and Tata are successful with a bid as their track record is the best of those interested. Our hopes have been raised and dashed so many times that we should wait and see.

  9. Indian journalists, same as Swedish ones… ;-)

  10. I wish the speculation would end. This is ridiculous. Let’s just wait until we KNOW! Please!

    Sorry to say this, but I don’t recall Swade doing this when he ran this site…….

    • One of several aspects of the current incarnation of SU that have diminished the site somewhat in comparison to Swade’s days, IMHO. The site’s still indispensible and incomparable to be sure, but there was a greater restraint and integrity to both news reporting and user comments in the past.

      I like everyone am crestfallen that the Tata interest isn’t real, as I too believed that was a wonderful option. Everything is so muddled as far as what’s real and not (and even the nature of the offers we actually know are real) that we’re all probably better off just not thinking anything until the result is announced.

      • The WORLD is muddled—-the line between hoax and is reality blurred like never before. Rumors can be newsworthy—-and Saabs United is reporting things accurately in that they cite sources and often qualify the posts by saying that they couldn’t substantiate the reports independently. I don’t have a problem with them trying to get ahead of the curve instead of waiting until the entire world has heard news before they report anything—which would seriously remove at least one of the reasons for coming to the site in the first place.

      • Seriously? I come back to write a “what-if” piece and reference one that Swade wrote on his own site and you tell me that you don’t recall Swade doing the same thing. Seriously?

        You people are cranky.

        • RS said on March 6, 2012

          It must be the after effect of the Indian Express ;)

        • Sorry if there was a misunderstanding. I can’t speak for the original poster I replied to, but *my* response didn’t relate to your “what if” post directly at all, just some larger issues relating to the site’s focus, tone, and civility that I hinted at above. If that’s cranky, well, it’s crankiness I hope is in the best interest of SU. You’re actually by far my favorite writer here and I just wish that we had an situation that would allow your talents to be applied to other topics and not to the speculation we’re all forced to deal with.

          • For now, Saab is in a coma. If it can wake up (in the right country with the right doctors) I’m happy to write more and really engage the community. Let’s wait and watch.

  11. A pity that Tata has denied interest.

    There could have been a good result ?

    Think :

    Jaguar = MB/VW
    Saab = BMW/Audi
    LR = 4WD

    By moving the branding in those directions they could share a cost effective distribution structure which will be one of the most crucial, but difficult, areas to recreate.

    Tata could also share existing IT, Finance, Purchasing, Logistics with Saab.

    Adding some of the previous Saab production, engineering and design people to the existing Tata groups would be a way to maintain the Saab brand values at an acceptable cost.

    .

  12. An excellent article, Jeff. Much in there to get people thinking, but as Bullnose (do you own an old Morris?) says, TATA deny making a bid and direct us to M & M`S bid.
    But while we all wait for some definite news, here`s a few snippets from the UK, that may just possibly have some bearing on what happens to SAAB;

    1. British car manufacturers are hiring more workers. Jaguar Land Rover (JLR) is creating a further 1,750 jobs, and Toyota has announced plans for 1,500 new jobs at its plant in Burnaston, Derby.

    JLR, Britain’s biggest car industry employer, has said that while it is considering plans to begin manufacturing in China, it will also be creating more jobs in the UK as it responds to increasing demand. It will increase production at its plant at Halewood, on Merseyside, where the Range Rover Evoque is made.

    JLR is also said to be close to a £1.75bn partnership with the Chinese carmaker Chery. (So does that leave enough in their coffers to buy SAAB?)

    2. GM is considering closing at least two factories in Europe, with Ellesmere Port and Bochum, in Germany, understood to be facing the most serious threat. GM is expected to make a decision on Ellesmere Port at the end of the month. (Serious enough for the UK Business Secretary to fly to USA to discuss with GM).

    3.Nissan will build its new compact car at its factory in Sunderland, creating 2,000 jobs and providing a major boost to one of the regions hardest hit by recession and spending cuts, the company says. (Helped by a £9m government grant).

    Comments in brackets are mine.

  13. If I recall correctly, the XF only received a 4-star rating at the NCAP which caused quite a stir in the automotive scene. I guess Saab could help there too!

  14. The SAAB/JLR fit would pretty much the same as the SAAB/BMW fit, right? A luxury/sports carmaker seeking an extension of range to offer a more complete vehicle lineup.

  15. Disappointing if true. Liked the evoque based Saab . Another one down, who’s up next? Wait and see.( the ship sinking) what a rollercoaster ride, what to buy now, xc60? Starting to lose the faith, and I’m sure not the only one. But the administrators are doing a good job, but also for Saab? HURRY UP!

    • yep same here……losing faith by the minute, every day for the last 3 months I have checked this site hoping that I see something that I want to see…….I will only believe it now when it’s there in black and white !!

    • I don’t know if the bankruptcy administrators are doing a good job—-or a bad job. I have no idea. Where is the evidence one way or the other? As for losing the faith—-I still think there is light at the end of this long tunnel—-that Saab can be sold as a whole to a bidder who wants to produce new Saab automobiles. The problem is, as time goes by, I see the chances of the new owner being successful becoming more and more difficult. If something could have been triggered much sooner, more of Saab’s extended family would have remained intact, around the world. Day by day, it’s going away, meaning that a new owner will be getting assets to start a car company for a good price and they’ll be…starting a car company, not taking over a car company. I know that this wasn’t going to happen a couple weeks—-had hoped for a couple months—-now hoping for a few months—-but might see it extend well beyond that, at which time the new owner will be getting some fine equipment with nobody to run it—-and a less interested customer base forced into buying other brands of cars. And no dealers to sell cars. It’s happening day by day. All of that said—-it will still be historic if Saab is revived, whenever that might happen.

  16. RS said on March 6, 2012

    So the ‘breaking news’ about Tata putting in a bid was totally bogus?
    Lets not start the party (next time) before checking that we actually have the lottery ticket in our back pocket…

  17. A good many people (Joseph comes to mind) figured out yesterday that it wasn’t Tata and posted here. For my part, when I first read it—-I thought “They must mean Mahnidra???” but then I quickly caught myself and said, “How can any reporter or news service in the same country as the bidder get that wrong? Could they be a total idiot?” Sadly, the answer to the question was a resounding, “Yes, they CAN be a total idiot.”

    • Same here.

      We’re no worse off than we were two days ago (Mahindra, Youngman, a bid including BMW is some manner, etc., etc.). Still a better-funded group than the 2009 collection of bidders.

  18. Jeff, I see the original Tata news got you excited. The one benefit from that initial announcement was to get you going again since we haven’t seen a post from you in a while.

    I really wasn’t expecting Tata to bid for Saab so the initial news was delightful to me given many of the reasons you expressed. You probably saw my almost identical comments about the Saabness of the Evoque and I’ve spread that word weeks ago in other forums.

    You are right that the Tata Chairman’s statement is rather definitive. He could have said no comment or we don’t comment on rumors instead of an outright no. The only hope is that they might be in a partnership to buy Saab so he can say no and still be truthful. Time will tell.

  19. Hi Jeff, Too bad that Tata pulled the rug out of a nice article.

  20. Maybe I’m the odd one out here, but I don’t actually care too much for the Evoque styling (seeing one in the flesh made me do a huge double-take), but I’m pretty conservative. What I do like about Tata is that, while making the Evoque, they are keeping the Range Rover Sport much as it has been for quite some time – a very iconic design. To me, it is to Range Rover (and SUVs in general), as the 900 Aero/SPG is to SAAB (and cars in general), or as the 911 is to Porche (and cars in general): a unique and timeless design. As you say, they seem to “get” the Range Rover brand + are making sure it stays very “British”, part of which is valuing tradition… all the while, developing new products to prevent the line from stagnating. I’m ok with the Evoque in that context!

    If Tata did bid, one advantage for them, like BMW, is that they have a broad dealership network. Saabs sold alongside Range Rover + Jaguar at the same dealer would make a lot of sense (no need for large super luxury Saabs or SUVs, contrary to Youngman ambitions). Any buyer who doesn’t already have a strong North American/European distribution network is probably mainly going for IP at this point. That said, I probably still consider BMW to be the better option from a business perspective.

    James…

  21. Exactly , that’s what I feel to.

  22. Jeff! Good to see an article from you, even if the speculative thesis later turned out to be untrue. Still, a good analysis and a good read! It’s too bad, really, but I’m still hoping for a positive outcome. I also hope you don’t feel too bad about the situation or some of the ‘criticism’ you’ve received in comments.

  23. Hey Jeff, Welcome Back!

    Just ignore all the cranky people here, some people haven’t weathered the emotional up and downs of the last year very well. I think your piece about Tata reflects what a lot of us have been thinking since the bankrupcy, unfortunately Tata doesn’t seem to be interested.
    Time to get a nice stiff drink and let things take their course.

  24. Bummer. Tata would have probably been my first choice as a consumer, but I think BMW would probably be better for dealers (at least here in the US). BMW sells far more cars than Jaguar and Land Rover in the US, so the dealers would probably prefer BMW. But Saab consumers who don’t like the idea of seeing a Saab one very corner, probably would prefer to be associated with a smaller volume car manufacturer.

    But this news also makes me wonder whether the BMW bid rumor is also real. BMW has not said anything — not announced that it made a bid — not even hinted at it — just not denied it.

    I am thinking realistically now, Mahindra is Saab’s best shot. It is nowhere as big as Tata or BMW, but still big enough to make Saab successful. And unlike Tata and BMW, it has no premium brand at all, and thus a greater need to make a premium brand successful.

    • I truly think the only chances for SAAB are Youngman and Mahindra, as confirmed bidders, and with $. All other rumors and speculated bidders I ignore completely until full evidence of their bids come to light, not just here on SU but in various media sources.

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