Ford to close deal with Tata

Final sale of Jaguar, Land Rover expected on Monday

Ford Motor Co. is expected to close the sale of its Jaguar and Land Rover luxury brands to India’s Tata Motors Monday, sources familiar with the situation said on Friday.

Terms remain largely unchanged from those in the preliminary agreement that Ford and Tata announced in March, they said.

Tata will pay Ford about $2.3 billion for the British carmakers, but Ford will contribute about $600 million of that to the Jaguar and Land Rover pension funds.

That means Ford will net about $1.7 billion from the deal, which concludes the Dearborn automaker’s long involvement with British luxury brands. Last year, Ford sold the Aston Martin carmaker to a group of investors for $925 million.

Ford declined to confirm. “As we have said, we expect to close in the second quarter,” said Ford spokesman John Gardiner.

With the U.S. auto market now in a severe contraction, Ford needs cash. After posting a $100 million profit in the first quarter, Ford is expanding its restructuring efforts and contemplating cutting as much as 12 percent of its U.S. white-collar work force.

Of the companies it acquired in Europe in the 1980s and 1990s to create a Premier Automotive Group, Ford still owns the Swedish carmaker Volvo. But with Volvo now struggling financially, it may also end up on the selling block, say sources close to Ford.

Analyst David Healy at Burnham Securities said the $1.7 billion that Ford will net “isn’t going to make or break Ford.”

But like most Wall Street analysts, he views the sale as a good move for the U.S. automaker. The cumulative cost to Ford of Jaguar has been estimated at between $11 billion and $13 billion.

While Land Rover — one of the first manufacturers of SUVs — has become profitable, its contributions to Ford were negligible. The two British carmakers “were a drain on both management and finances,” Healy said.

The sale of the British brands to Tata initially raised eyebrows. The Indian automaker, part of a $29 billion conglomerate, specializes in making trucks and inexpensive vehicles. It recently rolled out a $2,500 Nano car.

But industry experts say Tata has a good record managing acquisitions. In the past 10 years, it has bought Anglo-Dutch steel giant Corus Group to become the world’s sixth-largest steelmaker, the Daewoo commercial vehicles business, Britain’s Tetley tea company and American hotels, including the Pierre in New York.

With the acquisition of Jaguar and Land Rover, Tata Motors gains a foothold in most major markets. And with Daimler AG as a 7 percent shareholder in Tata, the Indian automaker may be able to seek cooperation or technical expertise from the German carmaker.

Ratan Tata, chairman of Tata Motors and Tata Sons, one of the holding companies for the group, said earlier this year that he was spurred to expand abroad by the prospect of fast-growing Chinese manufacturers. He pledged that Tata would preserve the identities of Jaguar and Land Rover.