Rumble in Singur: Will Tata Motors (TTM) pull out in time to launch the Nano?
Today's Financial News - Posted September 24, 2008
Tata Motors (TTM) is sitting on its hands, watching the deadline for the Nano launch approach, while its factory in Singur is still beset by protests, riots and delayed construction. Will Tata pull out of Singur to meet its own deadline? Or will it push through its original plans and produce Nanos in West Bengal? — Stephanie Grimmett
by Stephanie Grimmett
Baltimore — (TFN): India’s Tata Motors (NYSE:TTM) is still slugging it out in Singur, but with the debut for the Nano looming, it could pull out any day now.
Tata Motors was planning to construct its Nano vehicle, billed as “the world’s cheapest car”, at a factory in Singur, but the company has been beset with protests that kept workers locked in its factory for days and blocked major highways to and from the city all because of something that has more to do with the West Bengal government than it does Tata Motors.
The state of West Bengal declared the Indian version of imminent domain on the land it sold to Tata for its Singur factory. And one political party has used the complaints of a few farmers who were unhappy with the price they received for their land, which may not have even been legally theirs (property rights are somewhat vague and amorphous in West Bengal), to stir up a four-year-long controversy.
Tata managed to withstand years of vandalism, violence and bad-for-business press, but the Singur factory must begin production within the next few weeks to meet the company’s deadline for the Nano debut. And it doesn’t look like that’s going to happen.
Tata has already threatened to move its business elsewhere, perhaps expanding one of its four existing factory complexes in other parts of India. And the Karnataka state government in southern India has offered new land that comes without the threats of angry farmers attached. But the move and selection of an alternative site may have been nothing but a threat for West Bengal at this point.
How long will Tata hold out in West Bengal? No one is sure. The company can produce a small amount of Nanos from factories in Uttarakhand (in northern India) or Pune, but it will need a new facility if it wants to roll out 250,000 cars in the next year as planned.
In the meantime, the company is setting up a $914 million new rights offer for shareholders, and its stock has lost half its value in the last five months. Tata must do something, and soon, to bring back investor confidence.
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October 16th, 2008 at 3:14 pm
After the violence in Singur as well as the death of Lalit Kishore Choudhary, Tata made the right move and left.
For Singur to develop past subsistence farming, they need industry. The way to develop industry is through a predictable regulation and taxation regime that rewards the company for bringing jobs. Violent protests and murder is NOT the way.
I read a great article titled “Tata says ‘tata’ to Singur” at http://economicefficiency.blogspot.com/2008/10/... that really spells it out.