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Ford Motor has selected Tata Motors as the preferred bidder for Jaguar and Land Rover, putting India's largest truckmaker in a position to take over two iconic British luxury car brands.
Tata and the US carmaker would hold "further substantive discussions", Ford executive vice-president Lewis Booth said.
Ford might get as much as US$1.98 billion ($2.57 billion) from a sale, said Stephen Pope of Cantor Fitzgerald in London.
Buying Jaguar and Land Rover, which date back to Britain's colonial era, would give Mumbai-based Tata a presence outside Asia and provide access to new technology. Ford, the world's third-largest carmaker, wants to sell the brands to focus on its money-losing North American business.
Tata's bid reflected a "new guard" in carmaking, said David Cole, chairman of the Centre for Automotive Research in Ann Arbor, Michigan. Jaguar and Land Rover were "a signal of wealth", he said. "Everybody is going to notice."
Land Rover, which is making money for Ford under seven years of ownership, sold its first all-terrain vehicle in 1948, a year after India won its independence from Britain. Jaguar, with roots in the 1920s and known for sports cars such as the 1960s E-type, has lost money for Ford since being purchased in 1989.
The talks come less than a year after the 139-year-old Tata group, led by Ratan Tata, bought steelmaker Corus Group for US$12.9 billion. That made Tata Steel one of the world's top-10 steel producers.
"These are complex discussions and there is still much work that needs to be done," Tata said in its statement on the Ford talks. "We are pleased by the progress in the discussions to date."
Ford does not disclose financial figures for Jaguar and Land Rover, whose biggest markets are in Britain and the US.
Land Rover sold about 226,000 vehicles last year and Jaguar 60,000, spokesman Mark Truby said. US Jaguar sales dropped 24 per cent, while Land Rover gained 3.7 per cent.
Tata is the only Indian carmaker listed on the New York Stock Exchange.
Pivotal moments in Tata Group's early history were reactions against British dominance, according to the company's website.
Founder Jamsetji N. Tata formed his first business venture in 1874 to break a British monopoly in textiles.
India's first luxury hotel, the Taj Mahal Palace in Bombay, opened in 1903 in response to a British slight. Jamsetji began the project after he was denied entry into one of the city's hotels, reserved only for Euro-peans.
When completed, "it was the first building in Bombay to use electricity and the first hotel in the country to have American fans, German elevators, Turkish baths, English butlers and whole lot of other innovative delights," the website says.
The group's first steel plant began operating in 1912 after the British scorned Jamsetji's efforts.
Tata needs to improve its engineering ability to become a global player and can only do this through such acquisitions, according to Satish Ramanathan, at Sundaram Newton Asset Management in Chennai, southern India.
"They need to make quantum jumps, though digestion of these acquisitions is a different matter," he said.
Ford wants to sell Jaguar and Land Rover after failing to reach a goal of generating a third of earnings from its European brands by 2006, when it posted a record loss of US$12.6 billion.
Ford sold Aston Martin in May for US$931 million to investors led by British car-racing champion David Richards.
Ford failed to make Jaguar profitable and invested US$2.1 billion in the brand in 2005, almost as much as it initially paid.
- Bloomberg
