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Tata Motors ended months of speculation yesterday when it agreed to buy Land Rover and Jaguar for just US$2.3 billion ($2.86 billion) in a deal that gives short-term security to the 16,000 workers at the luxury marques.
The final price - less than half what Ford had paid for the companies, not to mention the billions it pumped into them over its two decades of ownership - was a reflection of how far the companies have fallen under the American giant's stewardship.
Ford was so desperate to rid itself of the struggling brands that it agreed to inject US$600 million into the pension funds to seal the deal.
It will also continue to supply components and technology, and provide financing, through its credit arm, to dealers and customers for up to a year to see through the transfer of ownership.
The deal won the immediate approval of the British Government and unions, who had worried about massive job losses.
The Unite union said it had secured written agreements from Tata on staffing levels and terms for all five of the companies' UK plants.
"The sale ensures our members' futures and we look forward to working with Tata," Unite's Roger Maddison said.
Analysts were sceptical of the soothing messages dispensed yesterday by Ratan Tata, head of the Indian conglomerate.
"There is no way Tata can keep those jobs in the UK other than for a brief courtesy period, and that's assembly line and supplier jobs. They have to go to India," said Krish Bhaskar, automotive consultant at the Motor Industry Research Unit. "It's very sad, but those are the economic facts."
Given the strength of the pound against the dollar, the world's largest auto market, the cost of production in the UK made it very hard for either Land Rover or Jaguar to make money and led to years of value destruction for Ford.
Land Rover is understood to be turning a modest profit, but Jaguar is another story. It has racked up billions in losses over the years, losses the ailing American giant was increasingly unable to shoulder.
Industry experts were also asking yesterday just what Tata's long-term plans for the marques would be.
Many questioned how well the acquisition would fit with Tata's strategy, until now at least, of making cars for the developing world. The company launched the world's cheapest mass-produced car, the £1250 ($3116) Nano, earlier this year.
Tom Donnelly, a professor of Automotive Business at Coventry Business School, said that even if Tata does eventually move some production overseas, it would likely do so on a "complete knock down" basis, where most of the guts of the car would be made in the UK - allowing it to keep its "Made in Britain" label and the cachet that goes along with it - but assembled overseas.
Some of the problems that have plagued Jaguar can be laid squarely at Ford's door.
For example, the company used the bodyshell of its Mondeo saloon, a mid-market family car, as the basis for Jaguar's X-Type.
Donnelly said: "The car looked like a very expensive Mondeo. They just can't afford to do that."
When the X-Type was launched, Jaguar spoke hopefully of generating annual sales of up to 200,000 cars per year and beyond. Last year, it moved a little more than 60,000, a drop of nearly 25 per cent from the previous year.
The success of its new XF model, launched earlier this year, is critical to its near-term health and how quickly Tata will be able to turn it around. Early reviews have been positive.
For Land Rover, the problems are equally daunting. Its gas-guzzling sports utility vehicles are facing increasingly stringent fuel efficiency requirements from the European Commission and US. And recent changes to the tax code will mean new buyers will have to pay a punitive tax. They are problems that Ford will gladly be rid of.
Industrial giant
* Tata Motors is India's largest passenger and commercial car maker.
* It is part of the Tata Group, headed by Ratan Tata, which has interests in steel, automobiles, information technology, communication, power, tea and hotels.
* This year, Tata Motors introduced the world's cheapest car - the Nano - which costs about $3000.
* The company has agreed to buy Land Rover and Jaguar from Ford for US$2.3 billion.
- INDEPENDENT
