Tatas bag Ford marques
The Hindu Business Line — March 27, 2008

Tata Motors on Wednesday said it would pay $2.3 billion to Ford Motor Company for its UK assets Jaguar Land Rover in an all-cash deal that is expected to close by the end of the next quarter.

The cost was the only remaining blank to be filled in as it was already a foregone conclusion that the Tatas were winning the deal. A definitive agreement for the brands, plants and intellectual property rights of JLR sealed the deal on Wednesday.

The cost turned out to be less than what Ford had paid for each of these luxury brands. The American company had bought Jaguar in 1989 for $2.5 billion and Rover in 2000 for $2.7 billion.

At closing the deal Ford will contribute up to approximately $600 million to the Jaguar Land Rover pension plans, said a statement from Tata Motors.

JLR will be acquired through a UK-based subsidiary of Tata Motors.

Financing
Mr Ravi Kant, Managing Director, Tata Motors, said at a tele-conference that the acquisition would be financed through a 15-month, $3-billion bridge finance facility from a syndicate of banks. "Over the next few months, we are confident that we will be able to replace this with longer term and more permanent funding, with equity, or with related instruments," he said.

There is also a plan in place for divestment of Tata Motors' investments; the company will be "reviewing, undertaking and putting in place a disinvestment programme to unlock value from some of our investments in various subsidiaries."

The deal brought Chairman of Tata Sons and Tata Motors, Mr Ratan N. Tata, into the world spotlight yet again, only a few months after he stood there displaying the Nano from the Tata stable to a wondering auto community that came from far and wide to see for themselves the world's first sub-$2,500 car.

And, a year ago saw him in the thick of news when he announced the acquisition of UK steelmaker Corus for more than $12 billion, India's largest overseas buy ever.

Retaining Identities
Now the same Mr Tata is poised become owner of two of the world's most expensive cars, one more than 60 years old, the other more than 80, whose "identities" he has promised will be kept "intact".

"We are very pleased at the prospect of Jaguar and Land Rover being a significant part of our automotive business. We have enormous respect for the two brands and will endeavour to preserve and build on their heritage and competitiveness, keeping their identities intact," he said.

Commitments
Both sides have made commitments as part of the transaction. Ford will continue to supply Jaguar Land Rover for differing periods with powertrains, stampings and other vehicle components, in addition to a variety of technologies, such as environmental and platform technologies.

It's a long-term arrangement that we have with them for the supply of engines, said Mr Ravi Kant. "We will have a fairly good period of two to three years during which we should be able to take the supplies from Ford."

In addition, Ford Motor Credit Company will provide financing for Jaguar and Land Rover dealers and customers during a transitional period, which can vary by market, of up to 12 months.

Employees protected
The Tatas have agreed to leave untouched the terms of employment for the British workforce of nearly 16,000 employees.

"The parties do not anticipate any significant changes to Jaguar Land Rover employees' terms of employment on completion," said the Tata statement.

There will be no immediate changes in the top management either, said Mr Ravi Kant.

Vehicle financing is something which normally Ford does not do for any other brand other than their own, he said. "But at our request they have agreed to have a transitional arrangement for up to 12 months in which they will be providing financing for Jaguar and Land Rover in all territories around the world. Meanwhile we are in discussions with various vehicle financiers. We feel confident that a transition time of 12 months is quite sufficient to make our own arrangements and we don't have to depend on Ford.

"We had a discussion with the pension trustees, and the pension regulator in the UK and and we have their confidence and approval for the transaction," said an official. .

Tata Motors had said earlier this month it would raise Rs 4,000 crore through issue of secrurities in India and overseas.

The Tata Motors scrip fell as news of finalisation of the deal trickled in Wednesday. It closed flat at Rs 679.4. The scrip was up 4.41 per cent from a week ago and down 3.23 per cent from a month ago.

JLR sales, performance
Between the two brands, Jaguar is the more worrisome in terms of its financials and sales numbers. Land Rover is quite the contrast recording its third successive year of high sales in 2007 with 2,26,395 cars sold around the world, capping its 60th anniversary by crossing the 2,00,000 mark for the first time in its history.

It has been many years since Jaguar returned a profit and the company has had to tone down its expectations of having a wider, more mass-market luxury brand reach that it had eight years ago. That was also the reason why Ford reworked the production plans for this brand and decided to retain its niche image by manufacturing less than 1,00,000 cars every year.

After acquiring the two brands in 1989, Ford has tried, only with limited success, to regain the premium, sporty image that Jaguar enjoyed in the 60s and 70s, including high profile designer Ian Callum. Jaguar's hopes currently lie squarely on the new XF, the brand's most modern, technologically loaded and luxurious sedan.

The Jaguar XF was launched earlier this year and it replaced the S-type in the company line-up. The coupe-like four-door sedan is available with both petrol and diesel powertrains, including a supercharged V8. The company is said to have received pre-orders of over 10,000 units of the XF.