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Tata acquires Jaguar, Land Rover for $2.3b PDF Print E-mail
Saturday, 29 March 2008

India’s Tata Motors said yesterday it was buying British luxury icons Jaguar and Land Rover from ailing US carmaker Ford for 2.3 billion dollars as it vaulted into the premium global car market, reports AFP.

The cash purchase, part of plans by India’s top vehicle maker to expand its reach beyond Asia, capped months of talks with Ford Motor Co., which is selling the prestige brands to focus on turning around its North American operations after losing 15.3 billion dollars over the past two years.

“We are very pleased at the prospect of Jaguar and Land Rover being a significant part of our automotive business,” Tata group chairman Ratan Tata said, pledging to keep “intact” the emotive emblems of the once reigning British auto industry and “build on their heritage.”

Tata Motors, part of the steel-to-outsourcing Tata Group empire, said the amount to be paid would be 2.3 billion dollars and added Ford would kick in up to 600 million dollars to the Jaguar and Land Rover pension plans. “Jaguar and Land Rover are terrific brands.

We are confident they are leaving our fold with the products, plan and team to continue to thrive under Tata’s stewardship,” said Ford chief executive Alan Mulally. “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 Co. that delivers profitable growth for all,” he added in a joint company statement.

Ford is getting less than half what it paid for the two marques after buying Jaguar in 1989 for 2.5 billion dollars and Land Rover in 2000 for 2.7 billion dollars. It has also pumped in millions of dollars to turn around the brands. Jaguar is still unprofitable but Land Rover is showing progress, analysts say.

Ford does not supply profit figures for the two brands. “One of the main advantages they (Tata Motors) have got now is access to global markets,” said Hormazd Sorabjee, editor of Autocar India.

The new purchase by the group, led by racing car enthusiast Ratan Tata, is another sign of corporate India spreading its global wings and comes a year after the conglomerate bought British steel giant Corus Group for 13.7 billion dollars, the biggest-ever acquisition by an Indian company.

The purchase “is once again a landmark in the march of Indian businesses... Kudos to Tatas for this leap ahead,” said S.S. Mehta, director general of the Confederation of Indian Industry.

Ford will continue to supply Tata with engines and other parts and provide engineering support. Tata will make a big technological leap by gaining access to the sophisticated engines of Land Rover and Jaguar, analysts say.

Britain’s Unite union joint general secretary Tony Woodley said he was “pleased” Tata was buying the brands and safeguarding 16,000 jobs.

The deal is expected to close by the end of the June quarter, subject to regulatory approvals, the companies said. With the purchase, Tata Motors is in the unusual position of making the cheapest car in the world as well as some of the costliest, with the sleek Jaguar XK selling for around 80,000 dollars.

In January, Tata unveiled the no-frills Nano at a price of 2,500 dollars in a bid to revolutionise travel for millions in India and elsewhere. Analysts have questioned how the Indian firm, which controls more than half of India’s truck market and nearly 20 percent of its passenger car market, will absorb the high-end marques into its staid but pocket- friendly vehicle line-up.

The purchase of Jaguar and Land Rover also comes at a time when an economic downturn has put the squeeze on demand for prestige vehicles. Of late, tough global economic conditions have put sales of expensive cars into reverse. “Both brands are already experiencing declining sales,” said Aniket Mhatre, auto analyst at Mumbai brokerage Prabhudas Lilladher. “The US is going through a slowdown so sales (of luxury vehicles) are not going to be that good.”

Some analysts also questioned whether luxury buyers are going to be keen on purchasing cars made by an Indian firm, saying it may devalue the prestige aura. “There may be an image issue in the US,” Global Insight associate director Neil King said from London.

Tata Motors plans to acquire the brands through a mix of existing cash reserves and new debt. It recently announced plans to raise up to one billion dollars to fund its domestic and global expansion. It is reportedly planning to launch an additional three- billion-dollar syndicated loan, much of it bridge financing, to cover its working capital needs for the purchase.

Analysts have expressed concern the company may be taking on too much debt for the purchase. Tata, whose long-term credit is already rated one notch below investment grade, is seeking to raise funds in a tough global climate, with the US-led subprime crisis making investors shun all but the safest debt.

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