LONDON (Reuters) - Ford Motor Co (F.N) on Thursday selected Tata Motors Ltd (TAMO.BO) as the front-runner to buy Jaguar and Land Rover, placing India’s top truckmaker in a position to take over two storied British luxury nameplates.
Ford, which said it will proceed with “focused negotiations at a more detailed level” with Tata, has been exploring a sale of the brands since June in an effort to shore up its balance sheet and reduce debt.
“There is still considerable work to do and while no final decision has been made, we will proceed with further substantive discussions with Tata Motors over the forthcoming weeks,” said Lewis Booth, Ford executive vice president with responsibility for Europe.
The sale of Land Rover and Jaguar, a perpetual money-loser, would help Ford focus on its multiyear restructuring in North America, which lost $12.6 billion in 2006. The company, which is starting to see results from its cost-cutting efforts, made $88 million through the first three quarters of last year.
Buying the luxury brands would give the Indian automaker -- which is set to unveil the world’s cheapest car at an auto show in India -- a substantial presence outside India.
With the sale, Ford would also be disbanding a stable of European premium brands, dubbed Premier Automotive Group, which has been an inconsistent financial performer.
Ford does not disclose financial results for individual brands, but Jaguar and Land River were put on sale after Ford failed to achieve an earlier 2006 goal of generating a third of its earnings from the European luxury brands.
Tata Motors is a member of the Tata Group, which comprises 98 companies that employ nearly 290,000 people in various sectors including steel, salt, software, energy, cars and trucks, communications and chemicals.
An acquisition by Tata would represent the latest instance of an Indian company buying a high-profile European industrial target as companies on the subcontinent flex their financial muscle to expand abroad.
Tata Steel Ltd (TISC.BO), for example, last year bought Anglo-Dutch steelmaker Corus for 6.2 billion pounds ($12.3 billion).
Tata Motors said it is pleased with the progress of the talks. “We hope both parties can reach an agreement in the forthcoming weeks, though these are complex discussions and there is still much work that needs to be done before that position is reached,” Tata said.
Ford, which expects to wrap up the sale early this year, had narrowed the auction to three bidders -- Tata, rival Mahindra & Mahindra Ltd (MAHM.BO) and U.S.-based private equity firm One Equity Partners.
Ford regards Tata, the only Indian automaker to be listed on the New York Stock Exchange (TTM.N), as a long-term owner that would invest in Jaguar and Land Rover.
Ford’s UK labor unions backed Tata over its rivals in November on the grounds that the work force’s best interests would be served by a partner with an established presence and background in manufacturing.
While price decides most auctions, the views of the unions and the UK count in this sale because Ford, which has other UK units and considers the country one of its larger markets, is eager to maintain good relations with both, a source familiar with the matter said.
The talks with Tata are not formally exclusive but the goal is for the companies to thrash out the final details of a deal in coming weeks, the source said.
Ford shares were down 13 cents or 2 percent at $6.47 in afternoon trading on the New York Stock Exchange.
Additional reporting by Poornima Gupta in Detroit and Rina Chandran in Mumbai, editing by Gerald E. McCormick