Tata and British jobs
Tata Motor Company, the Indian motor manufacturer, will announce on Wednesday that it has agreed to buy Land Rover and Jaguar for around £1bn from Ford.
The purchase agreement is likely to be seen by trade unions as safeguarding jobs in the UK for two reasons.
First, Tata will commit to following an existing five-year plan to invest in and develop the car manufacturing businesses. Jaguar and Rover employ just under 16,000 people, most of them in the Midlands and at Halewood near Liverpool.
Also, Tata will contract to buy engines and other parts from Ford until at least 2012, which should protect employment at Ford’s plants in Dagenham and Bridgend.
As of now, Tata has no plans to relocate manufacturing capacity to low-cost India. Instead it appears to see the purchase of Land Rover and Jaguar as a route into the middle to top end of the global motorcar market.
The deal represents one of the most ambitious purchases of a British based manufacturer by any company from the fast growing economies of Asia.
Ford will also try to reassure employees of Jaguar and Land Rover that they will face no financial risks from the takeover and that their pensions are safe – because it will inject £300m into their pension scheme, to eliminate any deficit.
Tata will be buying businesses that collectively made £250m of pre-tax profit in 2007. However that masks massively different performances from Land Rover and Jaguar, because Jaguar is lossmaking and all of that profit – plus a bit more – was made by Land Rover.
Land Rover is also three or four times the size of Jaguar by output.
Because Ford is a US company and Tata Motor Company’s shares are listed in the US, the purchase agreement will probably be announced early tomorrow morning in the US, or about mid-day in the UK.
Analysts are expected to say that £1bn for operations making £250m a year in profit – and without the burden of a pension fund deficit – represents a decent deal for Tata. But Jaguar and Land Rover require hundreds of millions in investment over the next few years. And returning Jaguar to profitability will neither be easy or without risks.