Posted on Tue, May. 13, 2008
By now you've likely heard that beleaguered automaker Ford (NYSE: F) will sell the British car companies Jaguar and Land Rover to India's Tata Motors (NYSE: TTM) for about $2.3 billion. Upon closing the deal, Ford will contribute $600 million to the two units' pension funds, leaving it with $1.7 billion, roughly a third of what it originally paid for the brands.
Tata apparently intends to maintain the units' current management teams. For at least three years, Ford will still supply power trains, stampings, and other parts and technologies for the brands. In addition, the sale agreement calls for Ford to maintain research and development and accounting support for a time. And financing will remain available from Ford Motor Credit for about a year.
Ford has recorded major losses in the last two years of more than $15 billion, watching as Toyota has surpassed it in production. In its latest quarter, though, it posted an encouraging $100 million profit.
At the same time, questions persist about the very viability of the grand old company founded by the legendary Henry Ford. So while the sale will permit Ford to run leaner and to concentrate on its core operations and its own survival, there appears to be little reason for us to suddenly become excited about its down-in-the-dumps shares.
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