Ford Motor Co, the world's third-largest automaker, will sell Jaguar and Land Rover to Tata Motors Ltd for at least US$2 billion as demand for the luxury vehicles falls at the fastest pace in at least three years.
Jaguar sales dropped 33 percent in the US and Europe in the first two months of the year. Land Rover sales fell 13 percent in the US and 7.7 percent in Europe during the period.
The purchase by Tata Motors, India's largest truckmaker, was to be announced yesterday, a person familiar with the transaction said. Ford, based in Dearborn, Michigan, is ending its 21-year investment as the US housing slump and job losses curb demand for the US$80,000 Jaguar XK and the US$93,000 Range Rover.
"These are vanity products and probably these brands will have a tough time in a weak economy," said Edwin Merner, who oversees US$2 billion as president of Atlantis Investment Research Corp in Tokyo.
Mumbai-based Tata Motors "will have trouble doing well in this sort of environment," he said.
Wall Street banks have eliminated 34,000 jobs in the past nine months in the wake of the collapse of the subprime mortgage market. US sales of luxury cars made by Jaguar, Bayerische Motoren Werke AG, Porsche SE and Audi AG have fallen this year.
Ford, which lost US$15.3 billion in the past two years, bought Jaguar in 1989 for US$2.5 billion and Land Rover in 2000 for US$2.73 billion.
Ford doesn't disclose financial figures for Jaguar and Land Rover, whose biggest markets are the UK and the US. Jaguar is unprofitable, according to analysts.
"Turning around Jaguar will be a major challenge," said Ashvin Chotai, a London-based independent Asian automobile analyst. "Tata will need to tread carefully and ensure there is no negative impact on these brands."
Tata has obtained US$3 billion of loans to use for the purchase, and Ford will contribute US$600 million to pensions for Jaguar and Land Rover workers, people familiar with the transaction said on Tuesday. "We've made significant progress," Ford spokesman Mark Truby said in an interview on Tuesday. "There are no major roadblocks."
He declined to give details.
"We're in discussions," Debasis Ray, a Mumbai-based spokesman for Tata Motors said on Tuesday.
Ford rose US$0.04 cents to US$6 in New York Stock Exchange composite trading on Tuesday. Tata Motors fell as much as 4.2 percent today to 651.1 rupees in Mumbai trading yesterday. The stock has fallen 17 percent since Ford named Tata on Jan. 3 as the preferred bidder for Jaguar and Land Rover.
The purchase would give Tata brands with histories dating back to Britain's colonial era. Tata would also gain an overseas sales network after only 10 years making cars.
Parent company Tata Group, which also owns units making tea, software and salt, is steering acquisitions by Indian firms abroad.
The group, led by Ratan Tata, bought steelmaker Corus Group PLC for US$12.9 billion last year in the biggest-ever purchase by an Indian company. The Tata Motors division signed agreements in 2003 to buy the Daewoo Commercial Vehicle Co for US$102 million, its first overseas acquisition.
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