Business The Epoch Times February 7 – 13 , 2008A6

By HEIDE B. MALHOTRAEpoch Times Washington, D.C. Staff

WASHINGTON—With a pop-ulation of 1.1 billion, an expanding economy, and a rapidly growing middle class, India seems to be the perfect market to introduce an in-expensive automobile.

With much media coverage, In-dian automaker Tata Motors Ltd. rolled out the Tata Nano at the New Delhi Auto Expo 2008. The Nano will become the world’s cheap-est and smallest car with a sticker price of around $2,500, which is more than $1,000 less than the next cheapest car, the Maruti 800.

Tata said that the model will be sold only in India for the first few years, and shipments to emerg-ing markets such as China, South America, and Africa may follow soon after.

Tata’s competitors quickly jumped into the fray. Baja Auto Ltd.—con-sidered to be the second largest motorcycle producer in India—an-nounced that it will build its own small car in partnership with Re-nault S.A. and Nissan Motor Co. in about three to four years. Ford Mo-tor Co., with an investment of $500 million, also promised a small car in India within two years.

Tata Motors is a member of the Tata Group, the largest conglom-erate in India. The group consists of 98 companies that operate in seven business sectors, including information systems and com-munication, professional services, consumer products, metal prod-ucts, chemicals, and energy. Tata Steel Co. Ltd. and Tata Motors are the largest companies within the group.

Keeping Costs DownThe Nano is meant to replace

rickshaws, motorcycles, and scoot-ers, according to remarks by Ratan Tata, Tata Group Chairman, in a report published on the Tata Mo-tors Web site.

The company projects to build and sell at least 1 million cars a year. To achieve this goal without investing billions of dollars, Tata looked for an unconventional way of building the car. It hit upon a

concept from the insurance indus-try, where outside contractors are “trained and certified” to build the Nano. The independent contrac-tors receive the technology and the know-how—similar to franchis-ing—but must bear all costs, in-cluding building and maintaining the manufacturing facility.

“We looked at a new kind of dis-tributed manufacturing, creating a low-cost, low-break-even point manufacturing unit that we de-sign and give to entrepreneurs who might like to establish a manufac-turing facility,” said Tata.

Cheapest Car Comes With a PriceThe Indian media hasn’t bought

into the cheap price of the Nano yet. “In fact, the figure is an intro-ductory offer excluding taxes and local duties; on the road, the car will actually cost between $3,310 to $3,819,” claimed Dinesh Mohan, a

transportation expert and profes-sor of biomedical engineering at the Indian Institute of Technology in New Delhi. His speech appeared in the Asia Times article titled, “In-dia’s ‘Cheapest Car’ Comes at a Cost.”

To consumers looking for a cheap car that can be easily parked, the Nano might seem like a god-send, and the downsides may be overlooked. The car is made of rel-atively low-grade aluminum, has a small dashboard, no airbags, no anti-lock braking system, no spare tire, and the engine is situated in the back of the car behind the pas-sengers. With the engine in the rear, there is little protection during a front-end collision.

Safety and Environmental Concerns?

While there are many benefits to owning the Nano, it may be the

least safe car in the world, according to InfoDB Mag, an online-based Indian magazine. Considering ur-ban India’s nightmarish traffic and driving patterns, accidents could be fatal.

This car “already fails the current Western emission and safety standards and will soon fail Indian standards too as In-dia adopts the ‘Euro-IV’ emis-sion norms,” said Mohan. The Euro-IV, which will come into effect in 2010, sets limits on the amount of pollutants emitted by automobiles. For now, the Nano meets current Indian regulatory requirements and exceeds Indian emission requirements.

Currently, India’s infrastructure is underdeveloped, and few funds have been earmarked toward build-ing and improving roads. There is little room for additional vehicles on India’s already overcrowded and

congested road system, according to a recent University of Pennsylva-nia study.

Global AmbitionsThe Tata Group has been on an

acquisition spree since 2000, buy-ing up 39 companies in the proc-ess, according to its Web site. In 2000, Tata bought beverage com-pany Tetley Group Ltd. of the United Kingdom. Over the years, Tata has acquired companies in many countries across different in-dustries.

In addition to becoming a rec-ognized global player, Tata’s rapid expansion allows it to take greater risks, understand different market conditions, and improve living con-ditions for people in Third World countries.

“India has people with skills. And it has people with considerable intellectual capabilities who have been leaving India because the op-portunities were not there. We have to create these opportunities,” said Ratan Tata in a 2005 interview with McKinsey & Co.

Struggling U.S. automaker Ford Motor Co., is divesting Jaguar Cars Ltd. and Land Rover Group Ltd. Analysts believe the brands can fetch around $2 billion, and Ford is currently in exclusive negotiations with Tata Motors. The potential acquisition allows Tata to gain val-uable insight into the latest manu-facturing, marketing, and quality control processes.

“We do not know whether it is Ratan Tata’s personal ambition that is driving the [Jaguar and Land Rover acquisition] or whether it is a strategy that has been thought out for the good of the company,” said Nandan Chakraborty, head of re-search at Enam Financial, in a re-cent Knowledge at Wharton inter-view.

At this point however, there are more questions than answers. How many Nanos can Tata sell? Will the luxurious marques of Jaguar and Land Rover be af-fected as a result of Indian owner-ship? Regardless, the emergence of Tata as a global industrial heav-yweight may finally signal the ar-rival of India as an economic su-perpower.

Tata Motors Thinks Big With Its Nano

Yahoo May Consider Google Alliance

Business Briefs

Technology: Dell Slashes 1,200 Jobs

NEW YORK (Epoch Times)—Round Rock, Texas-based com-puter maker Dell Inc. announced that it will cut about 1,200 jobs, 900 of which are due to the closure of a call center in Edmonton, Can-ada. The company announced a 10 percent job reduction last May to cut costs.

Dell spokesperson David Frink said in a press release that the job cuts are to increase the company’s efficiency and sim-plify its structure.

Last week, Dell reported that it will close all 140 of its retail stores, most of which are situ-ated in malls. The stores sold Dell computer equipment, ac-cessories, and provided techni-cal support for customers. Once a strictly mail-order company, Dell is increasingly negotiating with big-box retailers to distrib-ute its computers.

Transportation: United to Charge Extra for Luggage

NEW YORK (Epoch Times)—UAL Corp., the parent company of United Airlines, said that it will start to charge $25 for each domestic pas-senger to check in a second piece of luggage, unless they are a member of UAL’s frequent flier program.

UAL announced that the in-creased fee will go into effect start-ing this week on flights in May, and will help generate over $100 million in revenues and cost savings per year, the company told AP.

The additional fees are waived for passengers who have “Pre-mier” status on United’s Mileage Plus program, and those who book tickets for international travel can check in a second piece of luggage for free.

Media: News Corp. Earnings Rise

NEW YORK (Epoch Times)—Media conglomerate News Cor-poration announced that its second quarter earnings rose 1 percent over the prior year, despite falling revenues from television and movie production. The results were buoyed by higher profits from its affiliated Fox Broadcast-ing System and its 24 hour news channel Fox News Network.

The results were generally in line with analyst expecta-tions. Fox Broadcasting Sys-tem predominantly generates its sales from advertising, while its news network has benefited from charging cable companies higher rates to carry the net-work. Fox also incurred startup costs due to its new Fox Busi-ness Channel.

The Rupert Murdoch-led News Corp. recently closed its acquisition of Dow Jones & Co., the media giant that publishes the Wall Street Journal.

Economy: December Factory Orders Rise

WASHINGTON (Reuters)—New orders at U.S. factories rose a less-than-expected 2.3 percent in December, the steep-est gain since July, on strong air-craft sales, a government report showed earlier this week.

Orders for durable goods, items intended to last three years or longer, jumped 5 per-cent, also the biggest gain since July, as civilian aircraft orders climbed 11.7 percent, the Com-merce Department said. Dura-bles orders were revised down from the 5.2 percent gain origi-nally reported last week.

Analysts polled by Reuters were expecting a 2.5 percent gain in factory orders and a 5 percent rise in durable goods orders.

BIG DEAL: Tata Group Chairman Ratan Tata introduces the Nano, a five-door hatchback that will become the world’s cheapest car at $2,500. RaveendRan/aFP/Getty ImaGes

SAN FRANCISCO (Reuters)—Yahoo Inc. would consider a business alliance with Google Inc. as one way to rebuff last week’s $44.6 bil-lion hostile takeover proposal by Microsoft, a source familiar with Yahoo’s strategy said ear-lier this week.

Yahoo management is consid-ering revisiting talks it held with Google several months ago on an alliance as an alternative to Microsoft’s bid, which, at $31 a share, Yahoo management be-lieves undervalues the company, the source said.

A second source close to Yahoo said it had received a procession of preliminary con-tacts by media, technology, tel-ephone, and financial compa-nies. But the source said they were unaware whether any al-ternative bid was in the offing.

Few natural bidders exist be-sides Google that could engage in a bidding war, and Google would be unlikely to win ap-proval from antitrust regula-tors, some Wall Street analysts said.

Yahoo’s efforts to find an al-ternative bidder could simply be a measure to pressure Micro-soft to boost its bid, which val-ued Yahoo at $44.6 billion when first announced last Friday.

Sanford C. Bernstein analyst, Jeffrey Lindsay, wrote in a re-search note that “the Microsoft bid of $31 is very astute” be-cause it puts pressure on Yahoo management to take actions

that could unlock the underly-ing value of Yahoo assets, which he estimates are worth upward of $39–$45 a share.

Separately, Google Inc. fired back on Sunday at Microsoft Corp’s bid to acquire Yahoo Inc., accusing Microsoft of seeking to extend its computer software monopoly deeper into the Internet realm.

David Drummond, a Google senior vice president and its chief legal officer, said in a blog post that the combination of Mi-crosoft and Yahoo could under-mine competition on the Web and called on policy makers to challenge the combination.

Microsoft responded to Google’s arguments by saying that a merger with Yahoo would create a “compelling number-two competitor for Internet search and online advertising” to market leader Google.

“The alternative scenarios only lead to less competition on

the Internet,” Microsoft Gen-eral Counsel Brad Smith said in a statement.

Drummond argued that Mi-crosoft’s power stems from dec-ades-old monopolies in Win-dows—the software operating system used to control most per-sonal computers—and Internet Explorer, which is the dominant browser consumers used to view the Web.

Microsoft’s proposed merger with Yahoo would combine the No. 1 and No. 2 suppliers of Web-based e-mail, instant mes-saging (IM), and portals, which act as starting points for hun-dreds of millions of users seek-ing information on the Web.

The Google executive argued in an official blog post that Mi-crosoft could be looking to fa-vor Microsoft and Yahoo serv-ices by pushing customers to other Web services they own instead of letting customers elect to use rival services.

“Could a combination of the two take advantage of a PC software monopoly to unfairly limit the ability of consumers to freely access competitors’ e-mail, IM, and Web-based serv-ices?” Drummond said in a blog at googleblog.blogspot.com/.

In making its case for the deal during a conference call last Fri-day, Microsoft executives said Google—not Microsoft—was the one company antitrust reg-ulators were likely to bar from buying Yahoo, based on Goog-le’s dominance in Web search.

TOUGH CHOICE: As Yahoo Inc. reviews Microsoft’s $44 billion buyout bid, it may try to form an alliance with rival Google to stay independent. davId moRRIs/Getty ImaGes

With Microsoft and Yahoo losing the Internet war to Google, a merger seems logical. But can Microsoft, with a checkered past, clear the antitrust hurdle?

U.S. Loan Standards Becoming Tighter, Says FedWASHINGTON (Reuters)—

Banks in the United States tight-ened their lending standards and terms for businesses and consum-ers alike amid a deteriorating eco-nomic outlook, a Federal Reserve survey showed earlier this week.

The Fed’s January senior loan-of-ficer survey, which policy-makers had in rough form when they decided to lower benchmark interest rates by a half-percentage point last week, showed also that demand for loans weakened among businesses and households over the last three months.

Banks that were tightening busi-ness credit terms “pointed to a less favorable or more uncertain eco-nomic outlook, a worsening of in-dustry-specific problems, and a re-duced tolerance for risk as reasons for their more-restrictive lending policies,” the survey said.

The report is a further sign of the stiff headwinds facing the economy, where growth slowed to a near-stall rate of 0.6 percent in the final three months of 2007. The Fed cut a benchmark interest rate by a cumu-lative 1.25 percentage points in the

last two weeks of January to 3 per-cent in an effort to prevent the econ-omy from sliding into recession.

As the housing market collapsed earlier in 2007 and prompted a spike in mortgage delinquencies, the U.S. central bank has worried that tighter credit would choke off consumer and business spending, amplifying any deceleration of the broader economy.

The loan officers’ survey showed that one-third of domestic institu-tions tightened their lending stand-ards for business loans in the last

three months, a larger fraction than in the previous poll in October.

A significant number of banks said they had tightened price terms on business loans to all types of companies, including raising the cost of credit lines and premiums charged on riskier loans.

Meanwhile, significant numbers of banks tightened their lending standards on all types of mort-gages. More than half of the banks said they had tightened lending standards even on loans to borrow-ers with strong credit.

TIGHTENING CREDIT: A recent Federal Reserve survey suggested that U.S. banks have implemented stricter loan standards after the subprime loan crisis.JeFF mItchell/Getty ImaGes

Technology: Microsoft May Borrow Money to Buy Yahoo

SEATTLE (Reuters)—Mi-crosoft Corp. said it may bor-row money for the first time in its history to fund a portion of its $44.6 billion unsolicited of-fer for Yahoo Inc.

Microsoft also said it expects Yahoo’s board to agree to the deal quickly, but Yahoo said over the weekend that it expects to take “quite a bit of time” to weigh all of its strategic options includ-ing remaining independent.

Microsoft Chief Financial Officer Chris Liddell said the software company may issue some debt to finance the cash portion of its 50-50 stock and cash offer for Yahoo, instead of drawing down its entire $21 bil-lion cash pile.