Posted on Thursday 17 January 2008
As the sale of Ford’s Jaguar and Land Rover to India’s Tata Motors comes closer to fruition, sources close to the negotiations say that engines and engine technology have become the hot issues on the table. According to a report in the Detroit News, engine logistics and technology are being discussed in conjunction with other issues such as intellectual property, consumer credit, pensions and residual values for vehicles that are already leased – all topics that come as no surprise with the changing of hands of an automobile company and the effects this would have on its customers.
Ford will only be getting around $2 billion from the deal, suggesting that this move is more about streamlining Ford as a company rather than making a profit from the sales. Jaguar has been hemorrhaging money from Ford for years and will require substantial investment to get it out of the red zone. There are reports, however, that Land Rover has made a profit of $1.2b in the last year, effectively cancelling out Jaguar’s losses and making the combined entity a profitable unit.
The issue with the engines is quite serious - most of the engines used in Jags and Land Rovers are designed and manufactured by Ford and produced in their two British factories. In order to recoup the investment in these two engine plants and regain some of the capital lost through Jaguar, Ford wants Tata to purchase engines from Ford on a long-term basis.
Tata would prefer to produce their own engines in the long term although in the near-future they will continue to purchase engines from Ford. As part of the deal, Tata is also asking for some engineers to be included to develop their own engines, a request which has been causing friction in the deals progression.
Another sticking point concerns intellectual property, most notably the fact that some Jaguar products are based on the same vehicle architecture as other Ford products, effectively giving Tata the chance to modify the X-Type and sell it as a Tata sedan which would provide some significant competition to Ford.
The administration of the workers’ pension funds as well as financing is also being discussed, with debate concerning which company should be responsible for them.
Despite these issues, it is expected that a deal should be inked sometime in February, although there are still some other issues that must be addressed as well as the ones currently on the table.
Sounds like ford wants to keep some attachment to the companies. I hope they keep a tie to the intellectual properties. I can also understand why they would want to keep designing the engines; having a place to train their engineers in cutting edge engine design before they come over to more mass production design could only prove advantageous to both companies. Ford engineers get good experience, Tata gets experienced engineers.
I’d like to see how much ford will get out of this deal besides the cash; because as it was mentioned, this is very little money considering the amount that ford has invested in the two brands.
Seems ford did not think though the sale to well and forgot how many ford parts go into the two brands. Thats the problem when a company ties up chassis and engines with different brands.
Ford should have never sold to tata anyways and who wants to fork out big $$$$ for a Prestigious Brand of car that has a tata made engine.
I cannot wait until the successor of my actual Range Rover gets replaced by an indian engine - what a counter value for a € 100.000,- car.
Best regards,
Peter
That Jag had to go through one of the all time worst show-to-production changes. Looks like a new ford taurus to me.
^ hah, riiight. If Jaguar, a company associated with the builder of the Taurus and *uggh* the Pinto for the past 18 years, still retains its brand luster, I doubt that Land Rover has to worry about it’s losing its upscale image. By the way, in ‘06, Tata’s firms had revenues of $28.8 billion, and a market capitalization of $73.6 billion. They’re no slouch, I wouldn’t bet against that “indian engine”. They own many products and services you and your family members probably regularly use and enjoy.
Not to mention that with the U.S. falling deeper into recession, you’re only going to see a lot more U.S. owned brands moving into foreign hands. Perhaps you haven’t noticed that creditor countries from around the world are buying up Wall Street like hot cakes.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aBQfnE6n0A8s&refer=home
http://biz.yahoo.com/ap/071219/earns_morgan_stanley.html
http://www.bloomberg.com/apps/news?pid=20601087&sid=a3qbrjQctNl0
America’s already more dependent on foreign companies for capital and foreign banks to purchase debt than many realize. If people truly believe that the identity of the corporate entity, or the investors that own the majority of a company will somehow hurt the consumer brand…. Man oh man, you have to wake up.
When your precious Range Rover successor costs € 250.000+ instead of € 100.000, then you won’t be able to afford to be such a snob, literally. Didn’t mean to get off topic though. I guess the ignorant sarcasm in that comment just rubbed me the wrong way. But I ain’t mad at cha Peter, I got nuthin but love for ya.
Anyhow, if Ford is truly trying to get rid of the distractions (Land Rover and Jag) to focus on their brand, and because Jaguar/Land Rover haven’t been profitable for Ford, and because potential buyers weren’t exactly keeping Ford’s phones off the hook, I think that Tata ultimately has the majority of the chips on their side of the table. Ford doesn’t really seem to be in the greatest position to bargain for anything substantial.
Cheers,
Joy Pop
My first comment was for Pete BTW. I guess Chuck got a couple in there as I was typing.