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 yesterday, will expand Tata'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, a Tata statement said.
Ford bought Jaguar for $2.5 billion in 1989 and Land Rover for $2.7 billion in 2000. But the U.S. automaker has been struggling and wants to focus on its main brands.
Selling the companies at such a loss clearly shows buying them was a mistake for Ford, said Erich Merkle, vice president of auto-industry forecasting for the consulting company IRN Inc., of Grand Rapids, Mich.
Jaguar 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 are insufficient 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 new products to better compete with luxury automakers such as BMW AG, Merkle said.
Tata said it expected to make no significant changes in the terms of employment for Jaguar's 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, the lead auto analyst with the consulting firm Frost & 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."