Cash-strapped Ford Motor Co. announced yesterday that it 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.
The sale had been in the works for months and according to a press release, Tata will pay $2.3 billion for the British brands, but Ford will pay roughly $600 million in the Jaguar-Land Rover pension fund when the deal closes.
Ford bought Jaguar for $2.5 billion in 1989 and Land Rover for $2.7 billion in 2000.
Selling the companies at such a loss clearly shows buying them was a mistake for Ford, Erich Merkle, vice president of auto industry forecasting for the consulting company IRN Inc. in Grand Rapids told the Associated Press.
Jaguar never has 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 aren't enough to rescue Ford's finances, but the sale will allow the company to focus on its core Ford brands, Merkle said.
Tata said it expects no significant changes in the terms of employment for Jaguar and Land Rover's 16,000 workers. It said the transfer of the brands would take place at the end of the second quarter.
Tata Motors made headlines recently by building the first fully Indian-designed car. In contrast to the high prices that Jaguars and Land Rovers sell for, Tata recently announced plans to build a $2,500 car later this year.
Jaguars in the U.S. have sticker prices starting around $50,000 and can cost nearly twice that amount.