Jaguar & Land Rover sold to Tata today - well, almost
By John Duckers Business Editor
25 March 2008
Birmingham Post

© 2008 Birmingham Post & Mail Ltd

Jaguar and Land Rover will be sold to Indian conglomerate Tata today for EUR1 billion (£505 million) - but it could be another three to four months before the deal is completed.

Sources say the signing ceremony will take place in London but against previous expectations there will be no press conference.

Instead a statement will be issued tomorrow confirming the transaction has been tied up.

It will mark the imminent end of Ford's stewardship of the two companies with Tata set to take on the task of securing a prosperous future for the iconic marques.

It is believed Tata and Ford have injected about £200 million into the respective pensions schemes.

It has been described as a complex deal with the agreement running to hundreds of pages. Not only have the parties had to satisfy the unions but they have also had to negotiate on intellectual property issues, engine supplies, components and in the case of Land Rover with the Ministry of Defence.

After all that a whole series of regulatory hoops - none thought to be insurmountable - now have to be jumped including formal monopolies and mergers clearance and a go-ahead from the EU. That could take until the summer.

There have been reports that Tata has signed a EUR3 billion (£1.5 billion) one-year bridging loan from banks Citigroup and JP Morgan.

The loan is expected to provide the company with the money it needs to pay Ford as well as providing important working capital.

The unions have accepted it is the best possible deal on the table.

Unite negotiator Dave Osborne said recently that his members were reasonably happy - it has seen Tata pledge to keep production in the UK and promise to maintain engine supply agreements with Ford.

While some of the Ford engines are manufactured in Germany, the bulk are supplied from the company's plants in Bridgend in South Wales and Dagenham. It is believed that continuing arrangements have been sorted out.

Tata is said to have guaranteed the Jaguar Land Rover investment plan for five years.

Private equity groups had expressed interest in the two companies but would almost certainly have taken a much harder nosed approach, with job losses a real possibility and no real long term commitment on offer.

Tata was always seen as the better bet. The unions have been impressed by its stewardship of Corus and Ford wanted to avoid a messy exit which could have jeopardised its residual interests, such as the engine supply and intellectual property matters.

Land Rover is said to be profitable but Jaguar is a serious loss maker.

Tata now has the task bolstering the pair in a difficult economic downturn sparked by the global credit crunch.

It is expected to opt for Ford's more recent policy of selling fewer cars with higher profit margins. Ford's previous strategy of producing more and more Jaguars by extending the model range downwards proved a big mistake.

However, the issue for Tata is that things could get worse before they get better, particularly in the critical US market.

Sales of cars and light trucks in the US are expected to slow sharply in 2008, hitting their lowest level since 1994, influential industry tracking service JD Power has warned.

Land Rover, which has been celebrating three boom years, suffered a reverse in the States last month, with a 9.2 per cent dip to 2,819 units. Sales for the first two months of the year were 13.2 per cent down at 5,678.

Jaguar, which is hoping to start making up lost sales ground now that the highly acclaimed new XF mid-range saloon is in the sales rooms, was 10.7 per cent down at 1,063 last month and 33.1 per cent off at 1,727 for the year so far.

The la-*test*-('") registration figures from European car association ACEA showed Jaguar sales down 25.6 per cent in February compared with the same month last year, while Land Rover showed a decline for the second month in succession, off more than 12 per cent.

Jaguar sold 1,035 cars in Western Europe compared with 1,392 last year.