Tata Motors is in early talks with Ford to buy the latter’s units in Tamil Nadu and Gujarat, multiple sources said. If the transaction materialises, it will be Tata Motors’ second asset purchase from the US major. In March 2008, the Indian company bought Jaguar and Land Rover from Ford for $2.3 billion.
For Tata Motors, which is changing gears to eco-friendly vehicles, the addition of Ford’s manufacturing facilities in TN and Gujarat, will augment its capabilities in the automotive industry.
Tata Motors currently has three passenger vehicle making plants in India (one is a joint venture with Fiat Chrysler). The Ford India deal, which is at a nascent stage, comes after Tata Motors separated its domestic passenger vehicle business, valued at about £942 million, into a standalone entity.
Ford, for its part, would get to shed its money-losing India unit and escalate investments in electric and automated vehicles. Tata Motors’ interest in Ford’s local unit gained momentum after its leadership, including chairman N Chandrasekaran and executive director Girish Wagh, met Tamil Nadu government officials.
While Tata Motors has no manufacturing facility in Tamil Nadu, it has a plant in Gujarat, which is next to Ford’s production unit. Tamil Nadu is keen to find an owner for Ford’s facility in the state so that it can protect jobs as the US major has decided to stop making cars in India. Ford took the step after accumulated losses of its India unit crossed $2 billion over the last 10 years and the road to profitability continues to remain hazy.
Deliberations are continuing and Tata Motors could decide not to proceed with the deal. A Tata Motors spokesperson said that Chandrasekaran had a “courtesy meeting” with TN chief minister M K Stalin but declined to share details of the discussions. A Ford India spokesman said: “We continue to explore possible alternatives for our manufacturing facilities and have nothing further to comment on the ongoing speculations.” Though Tata Motors has not spoken about capacity expansion in recent quarters, it would be looking at it from a future angle, said Motilal Oswal Financial Services head (research) Siddhartha Khemka. “Its passenger vehicle business is doing good and the company may want to add capacity on the back of strong demand. If it acquires Ford India, the Sanand plant would bring synergy to Tata Motors while through the Tamil Nadu facility, it could diversify its manufacturing network.”