DETROIT - Ford Motor Co. is selling its storied Jaguar and Land Rover businesses 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-based automaker has been struggling and wants to focus on its main brands. Selling the companies at such a loss shows that buying them was a mistake for Ford, said Erich Merkle, vice president of auto industry forecasting for the consulting company IRN in Grand Rapids.
Jaguar has never 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 products to better compete with luxury automakers such as BMW AG, 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. The sale raises the Tata conglomerate's profile on the world stage, said V.G. Ramakrishnan, 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."
In England, some workers were upbeat about the change, but others worried about the future."People seem to be generally happy about the buyout. Tata has a reputation as a business which is going places and has ambition to be a major market force," said Lee Betteridge, 34, a Jaguar toolmaker.