Ford to Sell Jaguar, Land Rover To India's Tata at a Huge Loss
Thursday, March 27, 2008
DETROIT, March 26 -- Ford Motor is selling its storied Jaguar and Land Rover brands to India's Tata Motors in a deal that will net the U.S. automaker $1.7 billion -- roughly a third of the price it paid for the two luxury brands.
The deal announced Wednesday will expand the Indian carmaker's geographic reach and give Jaguar and Land Rover badly needed capital to update and expand their product lines.
The agreement had been in the works for months as cash-strapped Ford sought money to fund its turnaround plan.
Tata will pay $2.3 billion for the British brands, and Ford will pay about $600 million into the Jaguar-Land Rover pension fund when the deal closes, Tata's statement said.
Ford bought Jaguar for $2.5 billion in 1989 and Land Rover for $2.7 billion in 2000. But the Dearborn, Mich., automaker has been struggling and wants to focus on its main brands.
Selling the companies at such a loss clearly shows that buying them was a mistake for Ford, said Erich Merkle, vice president of auto industry forecasting for the consulting company IRN.
"How can you call it anything else?" he said. "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 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.
Tata Motors is part of Tata Group, India's oldest and largest conglomerate. Ford named Tata as the preferred bidder for the British automakers in January, essentially dismissing two other bids.
The sale raises the conglomerate's global profile, said V.G. Ramakrishnan, the lead auto analyst with the consulting firm Frost and Sullivan India.
"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," Ramakrishnan said.