IIndia, Ratan Tata is being mourned as a towering business leader who took the sprawling family-controlled Tata Group into international markets, retaining the founding spirit of capitalism with philanthropy. But the UK has its own reasons for chairing the group from 1991 to 2012. Two heavy industries in England – steel and car manufacturing – would surely have shriveled further without his long-term style.
Dad's 2007 purchase of Corus, a combined British steel and Dutch conglomerate Koninklijke Hoogovens, was a terrible deal – terrible timing and high cost. The Indian group, which agreed to take over at 455p a share, paid 608p, or £6.2bn, after a Brazilian rival appeared in a rival bid. The global financial crisis and the recession that followed led to an immediate collapse in steel prices. Steelmakers lost money across Europe. The writing was on the wall for a UK decision, as Tata was largely thought to be interested in Corus' modern Dutch assets.
And, indeed, the entire Tata Steel UK operation was put up for sale in March 2016 under Ratan Tata's successor, Cyrus Mistry, at a loss of £1m a day. However, by October that year, Ratan Tata, chairman of the Tata Trust, which controls the group, fired Mistry. Disputes between the two were widespread, but the immediate threat to the Port Talbot Steelworks in Wales was eliminated. By November, Tata had restructured steel in the UK.
There were more tactical retreats. Engineering Steel was sold to Liberty Steel while the long products division already in Scunthorpe went to Greybull Capital. But Port Talbot also plowed through the last blast furnace that closed in September as part of a recent reinvention plan to build a clean-electric reactor at the site.
Needless to say, the new strategy would not have happened without £500m of UK government support. Critics have long argued that Tata is an expert at extracting taxpayer subsidies. However, it is estimated that Tata has lost £5bn of steel in the UK over the years without receiving dividends, and is still here. The latest scheme still has £750m of Tata money – capital that could be used elsewhere. It's hard to think of many owners who endure the same level of financial pain and keep going.
On some level, the decision seems to flow from the group's roots as an organization that speaks to the importance of “community.” At the turn of the 20th century, the company's founder, Jamsetji commissioned Fabian Grandes Sidney and Beatrice Webb to plan social services in Jamshedpur, India's “Steel City,” northeast of Tatyana.
In car manufacturing, the main deal was Jaguar's purchase of Land Rover from Ford in 2008 for $2.3bn (£1.75bn). The JLR is an easy ride, but not without bumps. After the initial success of the acquisition, JLR overdid it by trying to compete in segments with the likes of BMW, a strategy that needed to be reversed.
The thing is – like steel – the Tata Group tends to be patient with its troubled UK operations. JLR has been slow to move into electric vehicles but has now committed to spending £500m upgrading its Halewood plant in Merseyside to build hybrid cars and prepare electric versions of its mid-size SUVs, the Discovery Sport and Range Rover Evoque. A gigafactory in Somerset (and more) to make batteries for those electric cars coming with state support. In 2008, rival bidders negotiating with Ford were all private equity-backed. One can certainly say that JLR is better owned by Tata.
Not all credit goes to Ratan Tata. More investment came only after he stepped away from day-to-day management. But he certainly shaped the group's obsession with investing in the UK, starting with the purchase of Deadly Tea in 2000, and his presence has made it difficult for his successors to take a backward step in the face of mixed financial results. The best.
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JLR's performance is now improving strongly and the company is a key player in the West Midlands economy. While that's little consolation for the people who will lose 2,500 jobs, Port Talbot has a solid plan for at least the next few years. The story could have easily been worse.
