Maybe Tata, Jaguar/Land Rover is not such an odd couple

Down a tree-lined street, the headquarters of Tata Sons feels tucked away. Practically hidden. One of India's most respected and admired companies occupies the Bombay House, a brown, four-story building built by Tata ttm in 1924, two blocks from traffic-jammed Mahatma Gandhi Road.

Still, the only time Ravi Kant, the chairman of Tata's (pronounced TAH-tuh) burgeoning motor division, gets a break from honking taxis down the block and the boisterous birds chattering at his window is when hammering by workers somewhere in the building drowns out other sounds.

From this modest, wood-paneled office, Kant is overseeing the most audacious double-play the auto industry has seen in years: Launching the world's cheapest car, the Tata Nano, and taking over luxury brands Jaguar/Land Rover from Ford Motor.

Although the Jaguar deal won't close until June and Nano production begins later this year, Kant already has issued a clear directive: Keep these vehicle lines separate and distinct. "Each is going to chart its own future and own course," he says. "The conflict would come if we were to try to put them together."

Tata's catapult into the news took many Americans by surprise. And with regard to Jaguar, some have questioned whether an Indian company almost unknown in North America is the best steward for one of the world's best-known car brands.

"We are talking about perception and image," said shareholder activist Evelyn Y. Davis at Ford's annual shareholder meeting earlier this month. "Tata sells cars that are $2,500. … How could the board sell us out to people like that, who sell cars like that?"

In fact, Tata Motors has built vehicles for more than 50 years and is part of a $28.8 billion international conglomerate with businesses that range from luxury hotels to iron and steel to cosmetics. The company is highly respected by Indians, who regard the Tata family as Americans regard the Fords. Indeed, Tata's textile mills had a head start on Henry Ford's admired labor practices, instituting eight-hour days in 1912, two years before Ford did it at auto plants in the Midwest.

Better appreciation of Tata's strengths and history turned Ken Gorin from critic to fan. Head of the Jaguar Business Operations Council, a U.S. dealer group, he once told The Wall Street Journal that sale to an Indian owner would cast "doubt over the viability of the brand."

Having gotten to know the soon-to-be owners better, he now says, "I initially expressed some reservations, and I believe I was wrong."

Ubiquitous presence

Around Mumbai, you can see the Tata conglomerate's influence on almost every corner.

There are Tata-brand trucks everywhere in the crowded streets. Many are painted in vibrant colors with "Horn OK Please!" plastered along the back, encouraging other drivers to make noise as they pass as a safety precaution.

There are the blue and white Tata Indicom billboards, advertising Tata's cellphone service. Indicom posters are plastered on apartment buildings, next to bridges, on trains.

Tourists heading to one of Mumbai's major attractions, the Gateway of India monument, click photos of the stately Taj Mahal Palace & Tower hotel behind it, yet another Tata business. Tata's chain of luxury hotels includes Boston and San Francisco locations and the Pierre hotel across from Central Park in New York.

Tata owns Tetley Teas, a watch and jewelry maker, an insurance company, a fertilizer business, a satellite TV service, a charter airline, a management consultancy and companies in information technology, engineering, steel and publishing.

Most of Tata's consumer products are sold in India, a market with about four times as many people as the USA. Its emerging economy is among the world's fastest-growing, with an annual rate of about 8.5%.

India is expected to be the world's fifth-largest auto producer by 2013, according to Detroit consulting firm AlixPartners, behind the USA, Japan, China and Germany. Tata is its largest vehicle producer, thanks to its commercial vehicles, but third in passenger cars.

Tata has experience taking over global brands, and its strategy has been to let each business run as its own entity, with modest input from the home office.

Kant points to Daewoo, the South Korean truck manufacturer, as an example. When Tata took over the company in 2004, many expected it would integrate Daewoo into its own truck operation in India. Instead, Daewoo still operates mostly as a Korean business.

"We want to be seen not as an Indian company operating in South Korea, but as a South Korean company operating in South Korea," Kant says. "There is a big difference."

Facing hurdles

This year will be a challenge for Tata Motors' new lines.

The rising cost of commodities is making it difficult, if not impossible, for Tata to hold Nano's price to 100,000 Indian rupees, about $2,500 at current exchange rates.

At the Jaguar/Land Rover unit, where Tata planned to keep current management, it now must find a new CEO. Geoff Polites, CEO for three years, died in April after a long illness.

The first thing Tata management will do when the purchase closes is tour Jaguar and Land Rover operations, with a week in the United Kingdom and a second in the USA. Gorin, the head of the dealer council and owner of The Collection dealership in Coral Gables, Fla., says he's excited to meet Tata's top executives and hear their plans.

But even as Tata adds these brands and expands its own car lineup, Kant says, Tata is not aiming to be the next Toyota.

"At this moment, our focus is on making sure we strengthen our position in the segments we are already in," Kant says, "and seeing that Jaguar and Land Rover go on to become not just a very cherished brand but a very profitable brand."

There are other issues facing Tata. Some, such as pensions and high wages, are similar to those in the U.S. auto industry. Indian labor is still far cheaper than in the USA: The average factory worker earns $1.20 an hour, vs. upwards of $20. But wage inflation has become a significant concern as India's economy heats up and demand for skilled labor grows.

For an Indian company, Tata has unusually big obligations to its workers. In the more than 50 years Tata Motors has made vehicles, it has built a strong social safety net for workers with pensions, jobs for life and a job for one of their children.

The company is trying to increase productivity instead of slashing benefits, Kant says. But it's a tough balance.

"We have respect for individuals, and have respect for people and for their families," Kant says. "All that we would still like to do, within the boundaries imposed by economics."

Charitable works

Tata has a long history of charity and humanitarian efforts, focused on improving India. Since its founding in 1868 by Jamsetji Tata during India's 89 years as a British colony, the family-held Tata Group has put a sizable chunk of its profits into Indian charities and social programs. The founder created a technical college and trusts for other charitable ventures.

The tradition continues. Last year, current CEO Ratan Tata accepted the Carnegie Medal of Philanthropy on behalf of his family. Tata's dedication to charitable works isn't common among Indian companies, says Vartan Gregorian, president of the Carnegie Corporation.

"Tata is in a class by themselves," says Gregorian.

Even Tata's move into hotels is said to have been a pro-India move: As legend has it, the founding Tata decided to open luxury hotels after being turned away by a British hotel.

Tata Motors likes to talk about the Nano as if it is a project to improve Indians' lives. It's designed to replace motorbikes, the dominant mode of transportation for many of India's working class. Entire families pile onto them, with Dad driving, Mom in her sari or traditional flowing salwar kameez outfit on the back and two or three children squeezed in around them.

A cheap, sturdy car, even without air bags and three-point seat belts in the back seat, is safer, or so Tata's thinking goes.

Kant says he expects the Nano will also be a key factor in India's changing demographics. The government is tripling investment on infrastructure to $500 billion a year and focusing on roads to connect remote, often poor, villages with each other and with cities.

"People want to change their quality of life, and through the roads, will go from one place to another," he says. "It will be explosive growth, and Nano will be an answer. Nano is not an urban product; it is a product for the country."

Learn as you go, with expert advice

Nano fits with how Indians see the Tata car brand: cheap, but useful, and one of their own.

"They are cheap cars, let's not kid ourselves. They are like McDonald's," says Vikas Sehgal, an automotive partner at Booz Allen Hamilton. "But the last time I checked, McDonald's has higher profits than Charlie Trotter's in Chicago."

After decades of experience in such vehicles as trucks and tractors, Tata Motors launched its first small sedan in 1998, the Indica, on the premise that India needed its own car. In 2002, Tata launched the Indigo, a slightly larger sedan that runs on diesel and gas.

The Indigo was riddled with problems, with consumers reporting they needed to fix radiators, engines and wiring within months. Mumbai residents who owned Indigos often would bring their complaints straight to the top, approaching Ratan Tata as he walked his dog through a public park in the mornings. He took notes, and brought the complaints back to engineers to be fixed.

The company was able to develop its car line and fix problems relatively quickly, in part by pairing with car manufacturers including Chrysler, Nissan and Fiat for technology.

"You don't have to do everything from scratch like you used to," says John Casesa, managing director of Casesa Shapiro Group. "These new companies have skipped stages of development that car companies used to go through. It's easy to hire German engineers, Italian designers, Japanese manufacturing people."

The speed and ability to adapt that Tata Motors has shown has some people wondering if Americans and others in developed countries underestimate its ability to manage a company such as the Jaguar and Land Rover operation.

"People are not underestimating Tata at all. They are ignoring it," says Sehgal. "The company is a global company, contrary to popular belief. If I were a (carmaker), I'd be afraid."

The company's plan to keep separate the Jaguar and Land Rover unit is part of what reassures dealer group head Gorin that Tata will be a good fit.

"Your fear as an automobile dealer is, what's going to happen? Is it going to grow and prosper?" Gorin says. "We really believe it will. They're a company that can invest and grow it long-term, and that's really critical."

Tata Motors chief Kant says he realizes the luxury brands still may struggle for a time because of the state of the economy. But he says Tata plans to own Jaguar and Land Rover for a long time and eventually will prove the skeptics wrong.

"People are free to make their own opinions, but I think time will prove who is right," he says.

"We are very confident that we have done the right thing, we have paid the right price. We have tremendous confidence in the management, and we are very excited by the products which are coming out."