The all-new Land Rover Discovery 3. Ford Motor Company has sold its Land Rover and Jaguar brands to Tata Motors for US$1.7 billion - ap
Ford Motor Company is selling its storied Jaguar and Land Rover businesses to India's Tata Motors Limited in a deal that will net the United States automaker US$1.7 billion (€1.08 billion) - roughly a third of the price it paid for the two luxury brands.
The deal announced on Wednesday will expand the Indian carmaker's reach around the globe and give Jaguar and Land Rover badly needed capital to update and expand their product lines.
The sale had been in the works for months as cash-strapped Ford sought money to fund its turnaround plan.
Tata will pay US$2.3 billion (€1.46 billion) for the British brands, but Ford will pay about US$600 million (€381.92 million) into the Jaguar-Land Rover pension fund when the deal closes, Tata's statement said.
Ford bought Jaguar for US$2.5 billion in 1989 and Land Rover for US$2.7 billion in 2000.
Struggling
But the Dearborn-based auto-maker has been struggling and wants to focus on its main brands.
Selling the companies at such a loss clearly shows buying them was a mistake for Ford, said Erich Merkle, vice-president of auto industry forecasting for the consulting company IRN Inc in Grand Rapids.
Jaguar never has made a profit under Ford, Merkle said.
"How can you call it anything else?" he asked. "You have to cut your losses at some point. It's been draining them of cash and resources."
The net proceeds aren't enough to rescue Ford's finances, but the sale will allow the company to focus on its core Ford brands, Merkle said.
Tata should have the cash to rescue the brands and develop new products to better compete with luxury automakers such as BMW AG, Merkle said.
Tata said it expects no significant changes in the terms of employment for Jaguar and Land Rover's 16,000 workers. It said the transfer of the brands would take place at the end of the second quarter.
Better branding image
The sale raises the Tata conglomerate's profile on the world stage, said V.G. Ramakrishnan, the lead auto analyst with the consulting firm Frost and Sullivan India.
"It gives them a much better branding image in the global market," Ramakrishnan said. "This is another important landmark step of showcasing that Indian companies are arriving on the global landscape. Many people will see this deal as the future of things to come - you will see more companies out of India acquiring global companies. They want to be seen as major global players."
In England, some workers were upbeat about the change, but others worried about the future.
"People seem to be generally happy about the buyout. Tata has a reputation as a business which is going places and has ambition to be a major market force," said Lee Betteridge, a 34-year-old Jaguar toolmaker.
But Paul Hoyte, 35, a Land Rover worker, said, "I am pleased I have kept my job. But for how long?"
Tata Motors built the first fully Indian-designed car. In contrast to the high prices that Jaguars and Land Rovers sell for, Tata recently announced plans to build a US$2,500 (€1,591) car later this year.
Jaguars in the US have sticker prices starting around US$50,000 (€31,827) and can cost nearly twice that amount.
Roger Maddison, an official with Unite, Jaguar and Land Rover's main labour union, said the deal is good news for the automakers' employees as well as those who work for parts suppliers.
"Unite has secured written guarantees for all five United Kingdom plants on staffing levels, employee terms and conditions, including pensions, and sourcing agreements. The sale ensures our members futures and we look forward to working with Tata," Maddison said in a statement.
Ford CEO Alan Mulally said in a statement that the British brands are leaving Ford in good shape.
"Now, it is time for Ford to concentrate on integrating the Ford brand globally, as we implement our plan to create a strong Ford Motor Company that delivers profitable growth for all."
Mulally has said Ford would invest the proceeds from the sale in quality and product development.
Tata said in its statement Ford will continue to supply engines, transmissions and other components "for differing periods".
Ford also will continue to provide environmental and other technologies as well as engineering support.
Tata Chairman Ratan N. Tata said in a statement that his company will try to build on the brands' heritage, keeping their identities intact.
C. Ramakrishnan, Tata's chief financial officer, said the company had secured a 15-month, US$3 billion (euro1.91 billion) bridge loan from a small syndicate of banks.
He said Tata expects to replace that financing with a mix of equity and debt during the next several months, including "unlocking value" from some of its investments in subsidiaries.
Ramakrishnan said the brands' existing management will continue.
Cash-hungry Ford, which lost US$12.6 billion in 2006 and US$2.7 billion last year, has been looking to sell Jaguar and Land Rover for months.
It has mortgaged assets to continue operations and expects to burn up US$12 billion (€7.64 billion) to US$14 billion (€8.91 billion) until 2009, when it plans to return to sustained profitability.
- AP
