Ratan Tata, who runs the Tata Group, one of India’s two biggest conglomerates, is buying into a history of trouble with his $2.3 billion cash deal, announced today,  to acquire the Jaguar and Land-Rover companies from Ford (F). Transfer of ownership to Tata Motors is due to be completed by the end of June, and the  question is whether Tata can then break a cycle of decline.

It’s been 40 years since the British government, in a bid to rebuild the country’s automobile industry, cobbled together ailing car brands such as Jaguar, Rover, Austin, Morris and Riley into a giant called British Leyland. BL, as it became known, was a failure, mainly because of endemic labor problems, uninspired products and poor quality. Since 1968, there have been many rescue attempts, but only rare short bursts of success. Several of the once proud names are long forgotten and none is British-owned; the iconic MG brand was bought three years ago by China’s Nanjing Automobile to make sports cars in China and the U.K., and the Morris Mini cult car is with BMW.

So could Tata succeed where others have failed? Market and industry analysts have their doubts, fearing the companies do not fit and that Tata’s optimism about growth could be hit by worsening economic problems in the United States and elsewhere. Tata Motors shares lost 4.4% on the Mumbai stock market today as brokers awaited the announcement.

But there is some reason for optimism. Ratan Tata isn’t expected to treat Jaguar and Land Rover like a traditional takeover: He says he’s not planning to overhaul senior management, close factories in Britain, or cut workers. He said today: “We have enormous respect for the two brands and will endeavour to preserve and build on their heritage and competitiveness, keeping their identities intact. We aim to support their growth, while holding true to our principles of allowing the management and employees to bring their experience and expertise to bear on the growth of the business.” Ford will continue to supply Jaguar and Land Rover with powertrains and other components, in addition to a variety of  environmental and other technology and support services.

Tata also doesn’t seem all that concerned about instant profits – just as he doesn’t expect instant returns from the tiny Nano car he hopes to launch by year’s end. Instead, he is expected to use the brands and their U.K. plants, executives and labor to help build Tata Motors, which had $7.2 billion sales in fiscal 2007, into a global car company. He’s been on this mission for several years, buying Britain’s Tetley Tea in 2000, a Korea-based Daewoo truck plant in 2004 and steel giant Corus (previously British Steel) last year.

Ratan Tata’s hands-off ownership could win him crucial support as he tries to fold the Jaguar and Land Rover brands into Tata. Mark Norbom, the head of General Electric in Japan, wrote recently in the Financial Times about the importance of the “soft side” of a takeover deal. The “look in the eyes that (the buying) company is worthy” has special value, said Norbom, and is something that “does not come naturally to the typical western-trained dealmaker.” Well, it seems to come naturally to Tata and his people. It was evident in the Corus deal, and it seems to be at work again in their Jaguar and Land-Rover plans.

This could, of course, mean that Tata is seen - especially by British trade union leaders - as a soft option who will let workforces carry on as usual. Land Rover has had three years of record sales for Tata to build on. But there’s no telling how long the status quo can last, especially if demand slackens in the United States and elsewhere and Ratan Tata has to institute cutbacks at the luxury car makers.

Tata has said that Land Rover and Jaguar will benefit from India’s low-cost design and IT ability - and boost sales in Asia. His company will “add value in co-operating on engineering and development which are considerably cheaper (in India) than in the West,” he said. Tata Technologies, the group’s advanced industrial design house, is based in Pune and operates in twelve countries, with international headquarters in Singapore. It has been involved in the design of Tata Motors’ cars and vans, but does about 75% of its work for foreign clients, including Chrysler, General Motors (GM), Boeing (BA) and Airbus.

There’s another question hanging over the deal: Tata’s future once its 70-year old patriarch retires. He is not due to step down until he’s 75 - in December 2012 - but has said he would like to go earlier, and there are rumors it could be at the end of this year.

That seems unlikely, if only because there is no clear successor. From inside the Tata family there is a reclusive cousin, Noel Tata, who runs some of Tata’s retail businesses, but there is no sign of him being groomed for the corporate and public life that goes with the top job. One or two top executives from outside the family, and even outside the Tata Group, have also been rumored, but none has been publicly held out as a successor.

It is Tata who has provided the personal drive and leadership to turn Tata Motors into a business that can produce the Nano and buy two world famous brands - in the same year. There’s a big job waiting for someone – and Tata is not yet saying who. Until it does, the era of uncertainty at Land Rover and Jaguar won’t be over.

Ratan Tata, who runs the Tata Group, one of India’s two biggest conglomerates, is buying into a history of trouble with his $2.3 billion cash deal, announced today,  to acquire the Jaguar and Land-Rover companies from Ford (F). Transfer of ownership is due to be completed by the end of June, and the  question is whether he can then break a cycle of decline.

It’s been 40 years since the British government, in a bid to rebuild the country’s automobile industry, cobbled together ailing car brands such as Jaguar, Rover, Austin, Morris and Riley into a giant called British Leyland. BL, as it became known, was a failure, mainly because of endemic labor problems, uninspired products, and poor quality. Since 1968, there have been many rescue attempts, but only rare short bursts of success. Several of the once proud names are long forgotten and none is British-owned; the iconic MG brand was bought three years ago by China’s Nanjing Automobile to make sports cars in China and the U.K., and the Morris Mini cult car is with BMW.

So could Tata succeed where others have failed? There’s reason for optimism. Ratan Tata isn’t expected to treat Jaguar and Land Rover like a traditional takeover: He says he’s not planning to overhaul senior management, close factories in Britain, or cut workers. And he doesn’t seem all that interested in instant profits – just as he doesn’t expect instant returns from the tiny Nano car he hopes to launch by year’s end. Instead, he is expected to use the brands and their U.K. plants, executives and labor to help build Tata Motors, which had $7.2 billion sales in fiscal 2007, into a global car company. His been on this mission for several years, buying Britain’s Tetley Tea in 2000, a Korea-based Daewoo truck plant in 2004, and steel giant Corus (previously British Steel) last year.

Ratan Tata’s hands-off ownership could win him crucial support as he tries to fold the Jaguar and Land Rover brands into Tata. Mark Norbom, the head of General Electric in Japan, wrote recently in the Financial Times about the importance of the “soft side” of a takeover deal. The “look in the eyes that (the buying) company is worthy” has special value, said Norbom, and is something that “does not come naturally to the typical western-trained dealmaker.” Well, it seems to come naturally to Tata and his people. It was evident in the Corus deal, and it seems to be at work again in their Jaguar and Land-Rover plans.

This could, of course, mean that Tata is seen - especially by British trade union leaders - as a soft option who will let workforces carry on as usual. Land Rover has had three years of record sales for Tata to build on. But there’s no telling how long the status quo can last, especially if demand slackens in the United States and elsewhere and Ratan Tata has to institute cutbacks at the luxury car makers.

Tata has said that Land Rover and Jaguar will benefit from India’s low-cost design and IT ability - and boost sales in Asia. His company will “add value in co-operating on engineering and development which are considerably cheaper (in India) than in the west,” he said. Tata Technologies, the group’s advanced industrial design house, is based in Pune and operates in twelve countries, with international headquarters in Singapore. It has been involved in the design of Tata Motors’ cars and vans, but does about 75% of its work for foreign clients, including Chrysler, General Motors (GM), Boeing (BA) and Airbus.

There’s another question hanging over the deal: Tata’s future once its 70-year old patriarch retires. He is not due to step down until he’s 75 - in December 2012 - but has said he would like to go earlier, and there are rumors it could be at the end of this year. That seems unlikely, if only because there is no clear successor. From inside the Tata family there is a reclusive cousin, Noel Tata, who runs some of Tata’s retail businesses, but there is no sign of him being groomed for the corporate and public life that goes with the job. One or two top executives from outside the family, and even outside the Tata Group, have also been rumored, but none has been publicly held out as a successor.

It is Tata who has provided the personal drive and leadership to turn Tata Motors into a business that can produce the Nano and buy two world famous brands - in the same year. There’s a big job waiting for someone – and Tata is not yet saying who. Until it does, the era uncertainty at Land Rover and Jaguar won’t be over.

Drive down major highways and you will sometimes see the almost unthinkable sight of the Reliance name on mothballed gasoline stations. As you scan daily newspapers, you regularly see stories of problems that Mukesh Ambani’s Reliance Industries (RIL), one of India’s two largest companies, is having opening its Reliance Retail supermarkets as traders in various parts of the country use street muscle and political support to block the expansion of a brand that threatens the rich pickings of middlemen, money brokers and local officials. The latest news (and I’m updating this post to include it) is that Reliance has just dismissed 870 staff and closed its ten Reliance Retail stores in Uttar Pradesh (UP) because of physical attacks that have endangered staff and shoppers.

Mukesh Ambani is of course hugely successful, controlling and actively running one of India’s two biggest groups with a market capitalization that last week topped $100 billion (four times that of General Motors) - and personal wealth of $45 billion, which makes him the world’s fifth richest businessman, just $11 billion behind Microsoft’s Bill Gates. But life is not as easy as it used to be. Till a few years ago, the Ambanis always won their battles. Now that’s becoming less true. The slide started in 2005 when, following the death of Dhirubhai Ambani who founded Reliance, the business was split by his two heirs, Mukesh and his younger brother Anil, after a bitter public battle. Since then, Anil Ambani has tended to do worse than Mukesh, who has much better contacts with the current government. Anil failed to win contracts last year to rebuild and manage the Delhi and Mumbai airports that went to other companies, and lost a Special Economic Zone in UP when the state government changed. This month he has lost a direct battle over the price of gas from his elder brother’s off-shore fields.

The mothballed gasoline stations are significant because they show that Mukesh Ambani can no longer be sure that he will win when dealing with the government - especially when he is branching out into areas occupied by strong vested interests. He launched what was to be a $1.2 billion network of over 5,000 stations four years ago, aiming to have 1,500 open by the end of 2005 and quickly become (as the family always does) a dominant player. But he reckoned without the clout of local politicians, who frequently hold the franchises of public sector gasoline stations, and arrange them for friends, and who do not like private sector competition. Well-established public sector companies like Indian Oil, Bharat Petroleum and Hindustan Petroleum also resented the interloper and two other private sector entrants, the Essar group and Shell.

The problems stem from crude oil prices more than doubling since Reliance launched its planned network. The government kept the public sector outlets’ diesel and gasoline prices below cost (at around $4.5 a gallon) and subsidized public sector oil companies supplying the outlets. The private sector operators could not afford to drop their prices by about $0.10c a gallon to match the public sector, and the government - pressured by the political and public sector lobbies – refused to help. This led Reliance to stop opening new outlets once it had reached 1,300. Of that total, 800 had been allotted to franchisees and 200 or more of these have been mothballed, with the others continuing in business.

It is also significant that Ambani has not been able to quell violent opposition - sometimes inspired by political parties for their own reasons - to his retail plans. This has held up expansion in states such as West Bengal, Madhya Pradesh, Delhi, ORISSA and Kerala as well as causing this week’s closures in UP, though he is branching out into other retail areas with the first of a series of hypermarkets already open and a chain of 115 clothing stores due to start within a few days. The current supermarket boom is India’s most socially significant business event of the decade because it will not only gradually transform shopping habits but will also change the lives of farmers who produce fruit and vegetables. That means gradually sweeping away a strong nexus of bureaucrats and traders who thrive in the current public sector-dominated food distribution system, which Reliance is seen as challenging. Ambani is having to trim his targets and delay supermarket openings. So far he has only managed to open about 300 stores, at least 100 short of his hopes, which does not augur well for a target set a year ago of 5,000 within five years.

The virulent animosity between the two brothers has led to them both trying to block the other’s plans. On the disputed gas prices, Mukesh Ambani persuaded the government to back him against Anil. Before the split, Reliance arranged to sell gas from its off-shore Krishna and Godavri field to a power station called Dadri that it was developing in UP for $2.33 per million British thermal unit (mbtu), the price at which it won a tender to supply a government power generating company (NTPC). In the split, the gas field went to Mukesh, while Dadri went to Anil. Mukesh then said he wanted to raise the price to $4.33 mbtu (only marginally higher than comparable prices elsewhere in Asia) because of the sharp increases in oil and gas marked prices. Anil argued that the $2.33 should not be changed and took the issue, which has a spin-off effect on gas prices, to the government – which has just ruled in Mukesh’s favor, trimming his price slightly from $4.33 to $4.20.

So the Ambani name has lost some of its clout and animosity between the brothers is making the situation worse. But the other lesson of this story is that there are still major areas where public sector-based interests, like the gasoline station operators and the food distribution traders, are trying to cling to the benefits of India’s old protected economy - even if it means taking on the previously unassailable Reliance.