In what could be one of the most significant shifts of clout in the auto industry, Ford Motor f will hand over the keys to its high-class Jaguar and Land Rover brands to a relatively unknown Indian conglomerate that wants to be a high-end player.
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 for the two brands, which cost Ford $5.3 billion, and continue building the British vehicles in the U.K.
Though not surprising — the transaction's been the buzz since July — it remains stunning to think of Ford selling its premium British brands to Tata Motors, a specialist in inexpensive, small cars. The industry has until now been focused on China as the next big world player.
"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."
Mike O'Driscoll, managing director of Jaguar Cars under Ford, says he met with Tata's top executives as the deal was being hammered out and is encouraged that the new owners will let the Jaguar staff run the company with little interference.
Tata "will give us some space. They want us to run our business, be a premium British car company," he says.
For struggling Ford, the move sheds two 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 deal catapults Tata Motors into a high-profile position in the global auto industry.
The automaker is controlled by Tata Group, a privately held Indian conglomerate with 98 operating companies in industries such as heavy trucks, energy, chemicals, communications and engineering, but the Tata Motors brand is not well-known worldwide.
It made a splash in January, though, when it announced plans for a $2,500 car to replace the motor scooters commonly used in developing countries to cart around entire families.
Tata earned $420 million in fiscal 2007, according to filings with the Securities and Exchange Commission, and sold 588,000 trucks and small cars that year.
"They are very serious, very well funded and not inexperienced in cars," says Tom Purves, CEO of BMW North America. "They are probably the best possible owner for Jaguar and Land Rover. Actually, they are probably the only company that could come in and do this."
"I didn't know anything about Tata, but I do now, and I'm very excited about it," says Blair Sharpe, owner of a Jaguar dealership in Grand Rapids, Mich. "It's a new chapter for Jaguar and Land Rover. (Tata) is a big company. They have lots of resources and the money to invest in new products."
Bert Boeckmann, owner of Galpin Jaguar in Los Angeles' San Fernando Valley, says he's encouraged by the sale. Tata Chairman Ratan Tata has shown enthusiasm for the product.
"I think they see this as a unique opportunity to gain some real recognition in the auto industry," Boeckmann says.