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Rich country, poor country

Business Standard  |  New Delhi 

Last week, American dealers of the ailing Jaguar brand said they opposed Indian ownership of the two brands "" Land Rover being the other "" that the US automobile giant Ford is planning to sell. Coming as it does just weeks after the UK unions said the Tatas were acceptable buyers, this comes as a surprise. The bigger surprise, perhaps, is the reason as given by Ken Gorin, chairman of the Jaguar Business Operations Council for this aversion to Indian ownership. He told the Wall Street Journal that he did not "believe the US public is ready for ownership out of India of a luxury car brand such as Jaguar". The reason, he said, was that India had "unique image issues". Mr Gorin was careful to clarify that this would apply to Chinese buyers as well.
It must be presumed that the "unique image issues" to which Mr Gorin refers have to do with the fact that a significant proportion of Indians (and Chinese) are poor. Presumably he thinks US car buyers will perceive some sort of dissonance between ownership of a company from a developing country and the owners' ability to understand the abstract concept of luxury or meet the high standards of manufacturing that such products demand. In other words, Indian ownership of Jaguar will be such a turn-off for US consumers in terms of image and product quality that they will buy fewer such cars which, in turn, will impact car dealers' revenues.
Several facts will show why Mr Gorin is probably being abnormally sensitive about Jaguar's possible Indian ownership. One can start with the connection between poverty and luxury. Perhaps Mr Gorin should talk a walk down the glitzy shops that line New York's Fifth Avenue, one of the world's most exclusive and expensive shopping districts and check the labels behind the tony brand names. Whether it is garments, electronic items or jewellery, Mr Gorin and his fellow dealers are likely to discover that they are mostly made in China, India, Bangladesh or any country with a relatively large number of poor people, and in any case by people who are not rich. Yet, so far, none of the purveyors of these ultra-luxury brands have complained that customers have stopped buying their products because they are made in countries that have poor people. It is difficult to see why car buyers would think differently.
Perhaps Mr Gorin is worried about manufacturing standards. Here he is on even weaker ground. He may recall that it was the inability of Jaguar's previous owners, British Leyland Motor Corporation, to maintain the high manufacturing standards that gave the car its formidable reputation and cult following, that led to ownership change in the first place. Now, it is clear that Ford, reeling under losses itself, has been unable to do the trick. On the other hand, Indian automobile companies, Mahindra and Tata among them, have built up a reputation for value engineering that combines acute cost consciousness with quality manufacturing capabilities. It is no coincidence that today, Detroit's turnaround hinges critically on sourcing solutions from India and China "" as Ford and General Motors themselves admit. It is of course true that there is no guarantee that either the Tatas or Mahindras will make a huge success of the Jaguar brand, if they get their hands on it. But neither did a company from the world's richest economy "" and car buyers clearly had a problem with that.

First Published: Tue, December 11 2007. 00:00 IST