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Ford, Tata Deal Could Keep Brands Tied to U.S. Auto Maker

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Ford, Tata Deal Could Keep

Brands Tied to U.S. Auto Maker

By MIKE SPECTOR and EDWARD TAYLOR

February 26, 2008 12:13 p.m.

Ford Motor Co. is widely expected to sell its Jaguar and Land Rover luxury brands to India's Tata Group, but the terms under discussion could keep the U.S. auto maker linked to the brands for years to come.

The deal between Ford and Tata Motors Ltd., the Indian company's auto arm, could come as soon as next week, according to a United Kingdom labor official at a union representing Jaguar and Land Rover workers. People familiar with the matter said the timing was likely but cautioned the talks remain fluid. Tata is expected to pay more than $2 billion for the luxury brands and related facilities and technology, other people familiar with the matter said.

Ford plans to sell its entire stake in the brands. But Tata signaled to British labor leaders last week that, under the deal, it intends to continue using engines and other parts currently built in Ford-owned plants in the U.K. Tata could continue to get the engines from Ford for the next five years, and perhaps longer, one person familiar with the negotiations said.

"Ford and Tata will, in effect, be industrial partners for some years to come," says John Casesa, a former Wall Street analyst who now advises auto companies. "Even if Tata wants to shop the world for new technology, it will take years for any new supplier to be ready to provide what may be needed, given the development testing and tooling required for major automotive components."

Ford will update investors on the progress of the negotiations when it files its annual 10-K report with the Securities and Exchange Commission this week, people familiar with the company's plans said. The update will disclose in qualified language when Ford expects a final sale to be completed, these people said.

A Ford spokesman declined to comment beyond saying executives "expect to have a deal early this year." A Tata Motors spokesman declined to comment.

Union leaders, who had developed job-security concerns as negotiations progressed, met with Tata officials last week in the U.K. "Nobody foresees any major problems now, everything is pretty much done," said Roger Maddison, a national officer for the British union Unite, which represents about 16,000 workers at Jaguar and Land Rover. He said a memorandum of understanding between Tata and Ford could be signed as soon as March 5 or 6.

Tata reviewed the product cycle plans for engines built at factories in Dagenham and Bridgend, Wales, Mr. Maddison said. "Tata gave assurances that they would stick to the existing business plan and indicated that they could foresee hiring more staff rather than preparing for cuts," he said.

Ford acquired Jaguar for $2.5 billion in 1989 and Land Rover for $2.75 billion in 2000. The Dearborn, Mich., auto maker is unloading the brands as part of Chief Executive Alan Mulally's strategy to focus on the company's core Ford brand. In assessing Ford's portfolio when taking the helm 18 months ago, Mr. Mulally decided that Jaguar and Land Rover were distractions.

The sale will also give Ford a bit more cash as it tries to restructure amid more than $15 billion in losses over the past two years. Land Rover has performed well of late, but Jaguar has suffered enormous sales declines in Ford's core North American market. The two brands are part of Ford's Premier Automotive Group, which also includes Swedish luxury brand Volvo, another struggling unit.

Ford doesn't break out financial results for the luxury group's individual brands, but the auto maker has acknowledged that Jaguar has been unprofitable for years. Ford has said it intends to keep Volvo, improve it and reposition it as a leading luxury brand.

--Eric Bellman in Mumbai, India, contributed to this article.

Write to Mike Spector at mike.spector@wsj.com and Edward Taylor at edward.taylor@wsj.com

Edited by smallchevy
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If that's the case Ford should use the XF platform for a new RWD Lincoln.

Edited by Dodgefan
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