Ford to net $1.7 billion for Jaguar, Land Rover

Ford Motor Co. is selling its storied Jaguar and Land Rover lines to India’s Tata Motors Ltd. 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 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 $2.3 billion for the British brands, but 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.-based automaker 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 such luxury automakers as BMW, Merkle said.

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.”

Tata Motors is part of Tata Group, India’s oldest and largest conglomerate. Among Tata’s holdings are steel companies and a consulting service that does software engineering and other work for Western firms.

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 $2,500 car later this year. Jaguars in the U.S. have sticker prices starting near $50,000 and can cost nearly twice that amount.

Ford Chief Executive Alan Mulally said in a statement: “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 Ford would 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.

Shares of Ford fell 13 cents Wednesday to $5.87.