Billionaire Indian industrialist Ratan N. Tata has long vowed to take his auto company Tata Motors [Get Quote] global -- and not just with the cheap models that have conquered the Indian market. Now he is pushing to realize that vision sooner than anyone anticipated.

Tata Motors has emerged as the front-runner in the contest for Jaguar Cars and Land Rover, which ailing Ford Motor is auctioning off. Sources close to the negotiations say Tata's bid is as much as $1 billion above those of other contenders.

Tata is facing off against India's Mahindra & Mahindra, primarily a maker of tractors, and New York's One Equity Partners, a private equity group that includes former Ford CEO Jacques Nasser. Ford, which is looking to pocket $2 billion from the sale, may not announce a winner for a few months.

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But right now Tata looks like the odds-on favorite. "It's the only car company bidding, and Jaguar and Land Rover are too small to survive on their own," says Garel Rhys, professor of automotive economics at the University of Cardiff in Wales.

It's an odd turnabout, in the light of history. An Indian carmaker, whose biggest claim to fame is its plan to turn out the world's cheapest car (a $2,500 four-seat sedan to be unveiled in January), snaps up two pedigreed British automakers.

Yet analysts point out that while Tata lacks expertise in managing upscale brands, it has pumped up sales and profits at many of its acquisitions, including truckmaker Daewoo [Get Quote] in Korea. Plus parent Tata Group, a sprawling conglomerate with $36 billion in assets, has plenty of cash to develop new models and hire the best talent the industry has to offer.

If Tata wins out, it will get a mixed bag. Land Rover is on the rebound, but Jaguar has been bleeding red ink for years, which is why Ford is selling them as a pair.

Tata Motors could cut costs at Rover by shifting some pre-assembly work out of high-cost Britain and by mining savings from joint purchasing. The Indians could also rev up sales of lower-priced models such as the rugged Defender in developing countries.

Pole position

As for Jaguar, it may not be as big a basket case as it looks. Analysts estimate that losses have narrowed this year to some $100 million. Ford has pumped $10 billion into the luxury carmaker over the past decade, retooling outdated factories, boosting productivity, and nudging quality up the charts.

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Jaguar ranked No. 5 in JD Power & Associates' 2007 initial quality survey, just below Toyota. A new modern design launched with the XF four-door model in September could help stoke sales. "Ford has spent a huge amount of money on Jaguar, and the impact will only be felt in two to three years as new models come to market," says Rhys.

But even though Tata seems to be in the pole position to win Jaguar and Land Rover, the race is far from over. The One Equity team recently recruited Wolfgang Reitzle, who managed Ford's Premier Automotive Group from 1999 to 2002.

Mahindra, meanwhile, has now joined forces with U.S. private equity company Apollo Management to strengthen financing for its bid.

Whichever company prevails will have its work cut out for it. Says Christoph St�rmer, senior auto analyst at Global Insight: "These brands can be very valuable for someone who knows how to manage them, and a big problem for those who don't."

With Nandini Lakshman in Mumbai.

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