Page last updated at 14:38 GMT, Wednesday, 26 March 2008

Tata buys Jaguar in 1.15bn deal

Jaguar, Land Rover logos
Ford put Jaguar and Land Rover up for sale last June

Car giant Ford has sold its luxury UK-based car brands Jaguar and Land Rover to Indian company Tata.

Tata, India's biggest vehicle maker, is paying $2.3bn (1.15bn) for the British brands after months of negotiations over price and supply relationships.

The negotiations started last June when Ford announced its intention to sell the companies as a package.

Jaguar and Land Rover employ about 16,000 staff at UK plants in the West Midlands and Merseyside.

Although Land Rover remains profitable, Ford has never managed to make money from its investment in Jaguar.

Now, it is time for Ford to concentrate on integrating the Ford brand globally
Alan Mulally, chief executive, Ford

Ford has been forced to sell the two companies, based at Solihull and Castle Bromwich in the West Midlands and Halewood on Merseyside, in order to concentrate on its loss-making core US car business, which it hopes to turn around in the next two years.

The $2.3bn price tag is about half the amount Ford originally paid for the marques, leading some analysts to argue that the purchase was a mistake.

"How can you call it anything else?" said Erich Merkle, an auto expert for US consulting company IRN.

"You have to cut your losses at some point. It's been draining them of cash and resources."

Ford sold its iconic Aston Martin marque to a UK-led investment consortium in a deal worth $955.2m last year.

No significant changes

The companies said there would not be any "significant changes" to Jaguar or Land Rover employees' terms of employment on completion of the sale.

They said that staff, trade unions and the UK government had been kept informed of developments and supported the move.

Tata said the deal should be completed by the end of the summer, subject to applicable regulatory approvals.

The purchase will give Tata the opportunity to expand its presence in the passenger car market beyond India and gives it the clout necessary to compete with international players.

TATA'S NANO
The low-cost Tata Nano at a car show in New Delhi in January
3.1m long, 1.5m wide, 1.6m high
Can seat four to five people
Meets European emission standards
Costs 1 lakh, or 100,000 rupees
Tata hopes to eventually export the car
Source: AFP

In January, Tata launched the world's cheapest car, the Nano, priced at $2,500 (1,250).

By contrast, the starting price for Jaguar's latest sports car, the XF is more than 32,000 ($64,000).

"We are very pleased at the prospect of Jaguar and Land Rover being a significant part of our automotive business," Tata said.

"We have enormous respect for the two brands and will endeavour to preserve and build on their heritage and competitiveness, keeping their identities intact.

"We aim to support their growth, while holding true to our principles of allowing the management and employees to bring their experience and expertise to bear on the growth of the business."

Alan Mulally, the president and chief executive of Ford, said he was "confident" that the brands would continue to thrive under Tata's stewardship.

"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," he added.

Terms

Under the terms of the deal, Ford will contribute about $600m to the Jaguar and Land Rover pension plans.

Ford will continue to supply Jaguar and Land Rover for differing periods with engines, stampings and other car components, in addition to a variety of technologies.

In addition, Ford Motor Credit Company will provide financing for Jaguar and Land Rover dealers and customers during a transitional period of up to 12 months.

"It seems as though they have resolved some tricky supply issues," said Ernst & Young's automotive expert Eric Wallbank.

"The deal will give Ford the cash to revive its fortunes in the US and focus on its core brand, while it adds an important plank to Tata's automotive ambitions," he added.


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Reactions of workers at Land Rover and Jaguar



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