If not the UK government, then self-help is best for the Tata group. If the group was strong enough to buy Jaguar and Land Rover, it can very well take tough decisions to make this buy worthwhile.
The Indian stock market has greeted Tata Motors-JLR plans to raise money sans any help from the UK government by pushing the stocks up 7%. This is a market that so far had not been kind to the JLR acquisition, generally considering it a drag on Tata Motors. JLR was bleeding Tata Motors. But the revival in the first quarter of this year with unexpected positive numbers, launch of the Nano and also the debut of JLR in India could mark a change in the fortunes of Tata Motors.
By firmly saying a big no to the UK government funding, Tatas are displaying confidence. Since September 2008, when the global auto industry was hit by massive drop in volumes and drying up of funding, the Tatas were looking to the UK government for support but the talks didn?t go their way.
The Tatas now say the positive trend in the external environment in financial markets and improvement in general liquidity and the arrangement of funds through private sources meant that they no longer needed the guarantees from the UK government.
UK business secretary Peter Mandelson responded by saying that banks and commercial capital markets meeting JLR?s funding is a clear sign of confidence in the company, its products and the automotive sector. ?We understand the Tata group will now be successful in resolving longer-term financial needs but we are willing to help again if necessary,? Mandelson said. But the British government did not walk the talk. They did not share this confidence before this and were clearly unwilling to take the risks with their taxpayers? money.
Now it is up to the Tatas to make a success of their JLR plans and make it sustainable. They have yet to pass the acid test. But when the turnaround happens, the Tatas should be laughing all the way to the bank and the UK government can rue the missed opportunities with their money going to bail out weak banks rather than resuscitating the manufacturing industry.
geeta.nair@expressindia.com