Tata Motors, the country’s largest automaker, has started preliminary negotiations with Ford about purchasing the latter’s units in Tamil Nadu and Gujarat. Last month, the American automaker announced that it would stop producing cars in India and close both of its operations there.
If a deal between Tata Motors and Ford is struck, it will be the Mumbai-based coffee-to-cars conglomerate’s second asset purchase from Ford. The Tata group purchased Jaguar Land Rover from Ford for $2.3 billion in March 2008.
According to several media reports citing unnamed sources, the Tamil Nadu government is in talks with the Tata Group about a prospective purchase of the Ford India unit in Chennai’s Maraimalai Nagar.
On Wednesday, N Chandrasekaran, Chairman of Tata Sons, met with Tamil Nadu Chief Minister MK Stalin and state Industries Minister Thangam Thennarasu. Although the nature of the high-level meetings was not disclosed, the Tata Group executives are seeing the CM for the second time in two weeks. On September 27, Tata Motors Executive Director Girish Wagh met with Stalin for the first time.
The Ford India agreement is still in its early stages, but it comes after Tata Motors won approval from the National Company Law Tribunal (NCLT) Mumbai bench in March to spin off its domestic passenger vehicle business, which is worth around Rs 9,420 crore. According to a storey in ToI, Ford would also be able to ditch its loss-making India operation and raise expenditures in electric and driverless vehicles.
Tata Motors expansion
Tata Motors, India’s largest automaker, currently has no production facilities in Tamil Nadu. It does, however, have a manufacturing facility in Gujarat, which is close to Ford’s. More crucially, TN is keen to find a new owner for Ford’s unit so that employment may be saved. And Ford India’s decision to close its production units will have a negative impact on small and medium businesses (SMEs). Ford made the decision after its India unit’s losses exceeded $2 billion over the previous ten years.
Tata Motors is in the process of deciding whether or not to close the deal. Chandrasekaran had a “courtesy meeting” with the chief minister, according to a Tata Motors representative, who declined to elaborate.
“We continue to examine prospective options for our manufacturing sites,” a Ford India spokesman said, according to the publication. Siddhartha Khemka, head of research at Motilal Oswal Financial Services, told the daily that the purchase makes sense for Tata Motors because it would be a distressed sale with certain benefits expected from the state government.