NEW DELHI — Tata Motors, part of India's fast-growing Tata Group, is buying Jaguar and Land Rover from the Ford Motor Company for $2.3 billion — about half what Ford paid for the brands when it bought them.
The long-awaited deal, which was announced Wednesday, also carries a painful payout for Ford after it closes. Ford will give Tata an additional $600 million to make up for shortfalls in pension plans when the deal is done, expected in the middle of this year.
The Tata Group, one of India's largest conglomerates, has been on an overseas acquisition spree in recent years, buying up everything from tea and coffee companies to steel manufacturers. Other Indian companies are also looking at overseas acquisitions as a weak dollar coupled with strong domestic growth make international takeovers attractive, particularly in the United States.
A weak dollar was the precursor to Ford's ownership of Jaguar, too — Ford started buying up stakes in the British car brand in 1989 after sales in the United States fell. Ford beat General Motors for the whole company, paying $2.38 billion at the end of 1989, and it announced plans to double or triple Jaguar's sales volume.
Ford, however, ended up cutting jobs and production instead, as the British and United States economies drifted into recession and the luxury car market slumped.
While Ford made improvements at Jaguar, sales have still been weaker than hoped, analysts said. Ford made "huge progress in terms of quality and manufacturing technology, but these have not proved to be enough," said Andrew Wright, an analyst with CSM Worldwide, an auto industry research company. Competition in the luxury car market has also been fierce in recent years. At the same time that Ford was investing in Jaguar, BMW was investing a "significantly higher" amount in its own brand, Mr. Wright said.
While most analysts and car enthusiasts are focusing on the transfer of the Jaguar name, Land Rover may actually hold more appeal and opportunity for Tata. Analysts say that Land Rover has turned a profit in recent years, which has been diminished by Jaguar's losses. Tata already builds luxury sport utility vehicles of its own in India.
Ford bought Land Rover from BMW in 2000 for just less than $3 billion after BMW failed to make the brand profitable.
The presence of Jaguar and Land Rover in Tata's portfolio creates a marked contrast with the product that made Tata an international sensation this year: the tiny Nano, a bare-bones hatchback that sells for about $2,500. As a result, some consumers may wonder how a company that builds the world's cheapest car can operate luxury automakers at the same time.
And if sales of Jaguar and Land Rover were disappointing under the guidance of a century-old American carmaker, will consumers be any more open to buying from a relatively unknown Indian company? Some car shoppers may hesitate, as they did decades ago when Japanese automakers known for small, fuel-efficient offerings began to build luxury sedans. But most consumers will not even be aware of Tata's presence, said Wes Brown, a partner in the Los Angeles-based automotive marketing firm Iceology.
"Unless you're an enthusiast, you don't know who owns the car companies," Mr. Brown said. "As long as the cars look good and work well, people aren't going to care."
Jesse Toprak, the executive director of industry analysis at Edmunds.com, a Web site that gives car-buying advice to consumers, said he did not expect much to change at Jaguar and Land Rover. Most vehicles will stay the same until at least 2011, after which Tata's fingerprints may become evident on new models.
"The reality is that the headquarters will be kept in England and most cars will be manufactured where they are now," Mr. Toprak said. "What will really determine their long-term success is the new generation of products that will come out of the new ownership. They need to come out with a very impressive lineup of new vehicles right off the bat."
When Tata makes deals, it rarely changes the character of the company that it buys over the near term. Ratan Tata, the chairman of Tata Sons, which controls units of the Tata Group, including Tata Motors, reiterated that strategy Wednesday, saying the Tata Group "will endeavor to preserve and build on their heritage and competitiveness" of the two brands, while "keeping their identities intact."
No changes are expected to employment terms for Jaguar and Land Rover's approximately 16,000 workers.
Building Jaguars in India is unlikely, analysts said, but there is a lot of room for sales to grow in emerging markets, where the number of affluent consumers has been increasing quickly. A third of Jaguar buyers are British, Mr. Wright of CSM said. "I don't think you can build Jags in India and retain the customer base," he said.
Ford is in the midst of a painful overhaul, shedding costly units and workers in the United States. The chief executive, Alan R. Mulally, said in a statement that he was confident that Jaguar and Land Rover would thrive under their new owners. "Now, it is time," he said, "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."
Ford has lost $15 billion over the last two years.
Ford will continue to provide some components, including powertrains, to Jaguar and Land Rover, which are built in Britain, as well as some research and development support. Ford's finance arm, Ford Motor Credit, will continue to provide financing to Jaguar and Land Rover dealers and customers for up to 12 months.
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