Tata Motors makes a memorable start to the new year at diametrically opposite ends of the market.
Ford [ Images ] Motor on Thursday confirmed it was "committed to focused negotiations at a more detailed level" with India's [ Images ] largest carmaker about the sale of Jaguar and Land Rover [ Images ], its two UK-based luxury brands.
Half a world away, in more ways than one, Tata prepares to publicise its long-awaited Rs100,000 ($2,500) "one-lakh" car at the Delhi [ Images ] auto show next week.
The two initiatives highlight the potential benefits of diversification but they also underline the risks of managing vastly disparate businesses.
Efraim Levy, automotive analyst at Standard & Poor's equity research arm, said Tata would be able to invest in Jaguar and Land Rover in ways Ford could not afford to. The Indian group would also expand its global presence and increase its prestige.
However, Mr Levy added, Tata faced the risk that "these brands could distract management and divert funds needed to focus on its growing home market, where we see Tata's light vehicle segment facing market share challenges".
Tata's offer for Jaguar and Land Rover is said to be in the range of $1.8bn to $2.2bn. The Indian group said it was "very positive about the prospects of this business going forward".
However, a deal is not a foregone conclusion. Ford cautioned that "a considerable amount of work" remains. Continuing talks will cover about 40 separate items, ranging from engine production to information technology systems.
And the US carmaker suggested it was keeping the door open to two rival bidders: One Equity, the private equity firm whose bid has been led by Jac Nasser, a former Ford chief executive; and Indian automaker Mahindra.
Ford put Jaguar and Land Rover on the block last year as part of a scheme by Alan Mulally, its chief executive, to focus on its flagship Ford brand and to insulate the Detroit carmaker's balance sheet from a continuing cash drain from North American operations.
The US group does not disclose detailed financial data about particular brands but has said Jaguar and Land Rover combined earned a "small" profit in the third quarter of 2007, due mainly to cost reductions.
Tata is already the dominant producer of commercial vehicles in India and it has increasing sales in the small car segment. It also collaborates with Fiat to introduce medium-priced vehicles into India.
The two historic brands would provide Tata Motors [ Get Quote ] with distribution marketing networks in western markets, particularly the US. And the powerful visibility of the brands would help put Tata on the map in terms of western consumer awareness.
However, Tata has already encountered resistance at Jaguar and Land Rover. The head of a Jaguar dealer group in the US voiced concerns that an Indian owner would tarnish the car brand.
Also, some analysts question how Jaguar and Land Rover would fit with Tata's utilitarian portfolio of buses, trucks and small cars.
"I'm confused as to what either party gets out of it," said Michael Tyndall at Nomura Securities in London [ Images ]. "Tata gets recognition on the global scene. You could argue that it gets technology expertise. But . . . overlap between the two company's product portfolios is practically zero."
Tata's passenger cars consistently rank at the bottom of authoritative quality and satisfaction surveys conducted by JD Power, a consultancy.
"If someone as big as Ford hasn't managed to resolve [problems at Jaguar and Land Rover], I would be slightly concerned," said Mr Tyndall.
Additional reporting by Joe Leahy in Mumbai [ Images ]