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Tata nears agreement with Ford on Jaguar-Land Rover

February 27, 2008 11:15 IST

India's Tata Motors could sign a deal with Ford to buy the US carmaker's Jaguar and Land Rover marques as early as next Wednesday or Thursday, people familiar with the deal said on Tuesday.

They said the negotiations on the deal, which would be the first major acquisition of globally renowned brand names by an Indian automotive manufacturer, are ongoing and have been complicated by long-term supply contracts covering areas such as engines.

"It might still slip but everyone's working towards that [March 5 or 6]," said a person familiar with the talks.

Progress was made after a meeting between Tata last Friday and Unite, the main union representing employees at Jaguar and Land Rover.

Valued at about $2bn, the deal would be Tata's first big foray into the international luxury automotive manufacturing industry, and a further step by Ford towards restructuring to focus on its North American businesses.

Ford, the world's third-largest automaker, lost $2.67bn last year and a record $12.6bn in 2006. Mumbai-based Tata is India's largest truck maker and second largest passenger vehicle manufacturer by sales, specialising in lower-cost small cars.

Ford declined to comment on the timing of any deal on Tuesday, saying only: "The discussions are ongoing and made good progress."

Tata Motors also declined to comment. "We are in negotiations and are happy with the progress," the Indian automotive manufacturer said.

But people familiar with the deal said Ford and Tata Motors were working hard towards signing a preliminary agreement next week as part of pledges to conclude arrangements by the first quarter of this year.

"Everyone is aiming for next week but whether or not that will be achieved, there is still a bit of an issue there," another person familiar with the negotiations said on Tuesday night.

The deal centres on thousands of pages of agreements on intricate vendor and supplier agreements between the Ford group and the two marques.

These cover areas ranging from engine supply, information technology, intellectual property and the two brands' financial services.

One person familiar with the talks on Tuesday said Tata is expected to agree to engine supply agreements that could span the next five to 10 years.

But even if it clinches the deal, Tata is expected to face significant challenges with Jaguar and Land Rover.

Land Rover is profitable, with worldwide sales rising 18 per cent last year to 226,395 units but Jaguar is loss-making, with its sales falling 19 per cent to 60,485.

Jaguar is planning to launch new models that may resurrect its fortunes but the deal comes at a difficult time for luxury vehicle sales, with a slowdown in the US economy expected to hit sales.

Joe Leahy in Mumbai
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