The credit default swaps market is turning on India’s Tata Motors (TTM). Concerns are mounting that the company will bite off more than it can chew by buying Jaguar and Rover from Ford (F). Given the billions of dollars that the US company lost running the companies, perhaps Tata cannot do any better.
According to the FT “This would be a large-scale acquisition for Tata Motors that could potentially have a negative impact on the corporate credit ratings on the company, especially if it is heavily funded by debt,” said Standard & Poors.
The fears are fair enough. Although Ford has not had the finest management team in the world as it has operated the two luxury brands, the Fords are car people. They dumped $2.1 billion into Jaguar in 2005. It has brought them nothing but grief.
Bloomberg reports that Tata may pay as much as $1.98 billion to Ford for Jag and Rover. If the India-based firm manages to bleed as much red ink over the brands as the US car company did, their best years as a company are behind them.
Douglas A. McIntyre
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