Jaguar: Finally Ready to Roar?

New owner Tata's deep pockets could fund wider distribution and hefty marketing for Jaguar and the already hot Range Rover and Land Rover

By David Kiley

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Ford Motor (F) sealed a deal Mar. 26 to sell its British Jaguar and Land Rover brands to Indian carmaker Tata Motors (TTM) for about $2.3 billion. That is less than half what Ford paid for the two brands—Jaguar in 1989 and Land Rover in 2000—and it reflects their dysfunctional operations, which Tata will have to sort out.

For Ford, the sale is a curious liberation from businesses it could never quite figure out and that cost it, by some estimates, in excess of $10 billion in losses over the years. For some Brits the deal marks a surprising twist in a long road for two storied corporate names. Could Winston Churchill, or even the current Queen of England, have imagined a half-century ago that a pair of Britain's proudest industrial icons would one day be owned by an Indian company?

Ford acquired Jaguar and Land Rover as part of a strategy aimed at building out its luxury car offerings beyond the venerable Lincoln brand, especially in overseas markets where Lincoln has little presence. But Ford was never able to rationalize the high costs of building Jags and Land Rovers in Britain. And labor unions kept severe pressure on Ford not to move manufacturing out of Britain. When Ford Chief Executive Oficer Alan Mulally arrived in September, 2006, and saw the record losses, dismantling the Premier Auto Group rocketed to the top of his to-do list. "These are expensive hobbies Ford can't afford anymore," he said last year.

A Field of Suitors

After Ford pays British workers around $600 million toward pension liabilities, it will net around $1.7 billion, according to company officials. It's not much, but every dime helps these days as the U.S. economy plunges deeper into recession. Ford posted a $2.8 billion loss in the fourth quarter, though that was thinner than its $5.6 billion loss in the year-ago quarter. For the full year, Ford shed $2.7 billion, compared with a loss of $12.6 billion in 2006. Ford hopes to turn profitable by 2009, but economic conditions are making that tougher to accomplish (BusinessWeek.com, 3/18/08).

Indeed, the latest estimate for March sales from Jesse Toprak, chief industry analyst for the auto information site Edmunds.com, predicts that consumers will have bought 12% fewer vehicles this month than a year earlier. J.D. Power & Associates reported that for the first half of March, information from dealers showed nearly a 22% decline from the same period last year.

Tata bested a field of suitors that included rival Indian carmaker Mahindra & Mahindra, a private equity group including former Ford CEO Jacques Nasser, and a British investment group. At one time, Renault-Nissan (RENA.PA) was in the mix as well, though it never entered the official bidding.

Wide-Ranging Conglomerate

Tata is an interesting owner for the British luxury brands. It is India's largest industrial conglomerate (BusinessWeek.com, 2/14/08), with a broad portfolio of more than 90 companies in seven business sectors: chemicals, communications and information technology, consumer products, energy, engineering, materials, and services. One of its largest operations is steelmaking. In the automotive sphere, Tata makes tractor trailers, full-size SUVs, and the world's cheapest car, the $3,000-plus Nano (BusinessWeek.com, 1/10/08).

Tata is no stranger to consumer marketing, catering to those with fat wallets as well as those who pinch pennies. Tata Tea is one of the largest tea producers in the world and owns the venerable (and also formerly British) Tetley brand. In the lodging industry, Tata's Taj Hotels command some of the highest rates in the world—one night in a luxury suite at the Taj Mahal Palace in Mumbai can cost $2,795. It is also building budget hotels around India with rates as low as $37.95 a night. The company also owns a chain of high-end jewelry stores, Tanishq. It operates an exclusive charter-airplane business and owns Tata Sky, which beams business news and hit movies into a million Indian households.