Ford Motor Company on Wednesday (26 March) said it had “entered into a definitive agreement to sell its Jaguar Land Rover operations to Tata Motors” for around US$2.3bn. 


The transaction was the culmination of Ford’s decision last August to explore strategic options for the Jaguar Land Rover business, as the company accelerates its focus on its core Ford brand and “One Ford” global transformation, the automaker said in a statement. 


“The sale is expected to close by the end of the next quarter and is subject to customary closing conditions, including receipt of applicable regulatory approvals,” Ford said.


The total amount to be paid in cash by Tata Motors for Jaguar Land Rover upon closing will be approximately US$2.3bn. At closing, Ford will then contribute up to approximately $600m to the Jaguar Land Rover pension plans.


“Jaguar and Land Rover are terrific brands,” said Ford president and CEO Alan Mulally.

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“We are confident that they are leaving our fold with the products, plan and team to continue to thrive under Tata’s stewardship.  Now, it is time for Ford to concentrate on integrating the Ford brand globally, as we implement our plan to create a strong Ford Motor Company that delivers profitable growth for all.”


“This is a good agreement.  It provides the Jaguar Land Rover management team and employees with the assurances needed to maintain their focus on delivering the best results for the business,” added Lewis Booth, the Ford executive vice president responsibe for Ford of Europe, Volvo and Jaguar Land Rover.


“I am confident that, under its new owner, Jaguar Land Rover will continue to build upon the significant improvements and product successes it has achieved in recent years.” 


As part of the transaction, Ford will continue to supply Jaguar Land Rover for differing periods with powertrains, stampings and other vehicle components, in addition to a variety of technologies, such as environmental and platform technologies.  Ford also has committed to provide engineering support, including research and development, plus information technology, accounting and other services.


In addition, Ford Motor Credit Company will provide financing for Jaguar and Land Rover dealers and customers during a transitional period, which can vary by market, of up to 12 months.


“The parties believe these arrangements will support Jaguar Land Rover’s current product plans, while providing Jaguar Land Rover freedom to develop its own stand-alone capabilities in the future that will best serve its premium manufacturer requirements,” the statement added.


The parties do not anticipate any significant changes to Jaguar Land Rover employees’ terms of employment on completion.


Tata Sons and Tata Motors chairman Ratan Tata said:  “We are very pleased at the prospect of Jaguar and Land Rover being a significant part of our automotive business. We have enormous respect for the two brands and will endeavour to preserve and build on their heritage and competitiveness, keeping their identities intact. We aim to support their growth, while holding true to our principles of allowing the management and employees to bring their experience and expertise to bear on the growth of the business.”


Jaguar Land Rover’s employees, trade unions and the UK government have been kept informed of developments as the sale process progressed and have indicated their support for the agreement.


Roger Maddison, the Unite trade union’s national officer for the automotive industry, said in a statement: “Today’s deal is really good news for the UK automotive industry and the thousands of people who work for Land Rover Jaguar and its supply chain.


“Unite has secured written guarantees for all five UK plants on staffing levels, employee terms and conditions, including pensions, and sourcing agreements. The sale ensures our members futures and we look forward to working with Tata.”


Union members interviewed for BBC lunchtime TV news reports appeared pleased with the deal, with some saying they expected job security for at least five years.


Jaguar Land Rover chief executive Geoff Polites said:  “Jaguar Land Rover’s management team is very pleased that Ford and Tata Motors have come to an agreement today.  Our team has been consulted extensively on the deal content and feels confident that it provides for the business needs of both our brands going forward.


“We have also had the opportunity to meet senior executives from Tata Motors and the Tata group,” Polites added.  “They have expressed confidence in the team that has delivered significant improvements in [our] business performance.  We feel confident that we can forge a strong working relationship with our new parent company, and we look forward to a bright and successful future for Jaguar Land Rover.”


Earlier on Wednesday, the London-based Daily Telegraph news noted that Tata, which owns Britain’s famed Tetley Tea company and bought Anglo-Dutch steel company Corus last year, had been front runner to buy JLR for months.


But the paper said a source has told it that negotiations over Ford continuing to supply components, including engines, to JLR’s three factories were “protracted and difficult”.


Tata had obtained US$3bn of loans to use toward the purchase while Ford would contribute $600m to pensions for Jaguar and Land Rover workers, the Daily Telegraph said. Tata would keep open the three JLR factories at least until the end of 2011 while it carries out the existing product development plans, it added.


The paper noted, however, that there are fears here in the UK that after the end of 2011, Tata could shift some production abroad and source components from outside the UK.


As well as giving Tata access to leading automotive technology, the purchase gives the company an overseas sales and distribution network, the Daily Telegraph noted.


A source with knowledge of the deal told just-auto that 2011/2012 mentioned in recent media reports referred to the current business plan for Jaguar and Land Rover but that did not necessarily correspond with the timing of some of the agreements reached between Tata and Ford.


Engines, in particular, had long life spans, the source said, adding that some of the agreements could well last into the mid to late 2010s.


The source indicated that, within certain model lines, supply periods – of slightly different lengths – had even been agreed down to an engine-by engine basis.


“Don’t see 2011 as some kind of cut-off date or anything because that wouldn’t be the case,” the source added.


The source also said that there was some potential in the future for platform-sharing between Ford and the brands newly acquired by Tata.


Land Rover’s Freelander 2 small SUV, for example, shares its ‘component set’ with ongoing Ford Europe models such as the S-Max minivan/MPV and a number of Volvo models.


“There still will be co-operation,” the source said.