Ford plans to sell Jaguar, Land Rover to Tata Motors
DETROIT -- The sale is expected to be announced Wednesday, according to a source briefed on the negotiations who did not want to be named because the deal had not yet been made public. Tata is to pay about $2 billion and has agreed to continue to build the vehicles in their British plants. The complicated deal will also cover continued supply of Ford-made components and deal with labor issues. Ford has been working with Tata on details of the sale for several months.
"This represents a first, with an Indian company really stepping outside as an investor with a significant couple of brands," says David Cole, chairman of the Center for Automotive Research. "And it enables Ford to convert what has been a pretty extensive part of the company into some needed cash. This is really a pretty big step."
Tata Motors, a maker of light and heavy trucks and family cars, is attempting to broaden its global automotive presence.
For struggling Ford, the move sheds two more European luxury brands that had become a drag on cash. Particularly draining was Jaguar, in which Ford sank nearly $10 billion trying to revive the brand after spending $2.5 billion to buy it in a deal that closed in 1990.
The sale to Tata is central to Ford CEO Alan Mulally's strategy to turn the company around by refocusing on its core brands, which include the Ford blue-oval brand, Lincoln and Mercury.
Ford also needs cash. It lost $2.7 billion in 2007, $12.7 billion in 2006. Mulally is aiming to reach profitability in 2009, a tough goal with U.S. sales shrinking in 2008.
Once Tata takes over Jaguar and Land Rover, only Volvo remains from Ford's decade-long European buying spree.
To raise money, Ford in March 2007 said it would sell about 92% of British superpremium brand Aston Martin for $848 million to a consortium made up of David Richards, founder and chairman of motorsport and auto technology company Prodrive; John Sinders, an avid Aston Martin collector and a backer of Aston Martin Racing; and two investment companies based in Kuwait. Ford had bought 75% of Aston Martin in 1987 and the rest in 1994.
Although there has been speculation that Ford will sell Volvo as well, Mulally has said he intends to hang on to Volvo, at least for now.
For Tata Motors, the deal catapults its profile in the global car marketplace. The automaker is controlled by Tata Group, a privately held Indian industrial conglomerate with 98 operating companies in industries such as heavy trucks, energy, chemicals, communications and engineering, but the Tata brand is not well-known worldwide. It made a splash in January, however, when it announced it would make a $2,500 car as a replacement for mopeds, which are commonly used in developing countries to cart around entire families.
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