Ford, Tatas need to iron out issues: Frost & Sullivan

04 January 2008

Sarwant Singh, automotive and transportation practice director, Frost & Sullivan, says the premium Jaguar and Land Rover brands can help position Tata Motors' Rs1-lakh car in the future. CNBC-TV18 shares with domain-b its exclusive interview with Singh:

Complexities are something that both companies have stressed on. What do you think some of the stumbling blocks or major hurdles are likely to be as Tatas try to close this transaction?
I think it would be interesting in the next couple of months to see how this deal pans out. Some of the complexities we might see is how Ford and Tata agree on certain things like sharing of engines, certain platforms and components and also on pensions and things like that.

Personally, I think it will be good for Ford to maintain a little stake for these agreements to go on not just in the short-term but for the long-term for two - three years and that is the kind of period Tata needs to be able to become the standalone owner of these two brands.

What is the pension regulatory situation in the UK? Are there any other regulatory challenges that you foresee, that could trouble this deal?
One of the recently talked about regulatory issues relates to the EU legislation on CO2 emission levels. It is a bit harsh on companies like Jaguar and BMW, because it penalises them if they have CO2 emissions above certain limits.

I think that could be one of the indirect challenges coming in. What Tata will have to do is ensure that the cars by 2012 meet these regulations. There is a severe penalty if they don't, which means that they will have to invest a lot on environment friendly technologies.

How much would this cost the Tatas?
There will be two types of costs, one is development cost that they will need to incur, which could be up to £200-£300 million. They also need to see as to whether they need to, perhaps, pay a fine. It all depends on if they are able to meet these regulation or not.

But this could be a significant cost, close to £100-£200 million.