In March 2008, Ford announced the sale of Jaguar and Land Rover to the Indian conglomerate Tata Group. Although the trade union Unite was originally against the sale, it said it was pleased that Tata had become the new owner. In taking over the two British luxury car marques, Tata also endorsed the current five-year business plan which includes €890 million of investments in carbon dioxide emission reductions.
In March 2008, the Ford Motor Company announced the sale of its British luxury car marques Jaguar and Land Rover to Tata Motors for approximately USD 2.3 billion (about €1.5 billion as at 28 April 2008). The US carmaker Ford bought Jaguar in 1989 and Land Rover in 2000, and the sale reflects fierce competition, as well as high pension and healthcare costs. The transfer is expected to come to a close later in the year, when Ford will contribute up to USD 600 million (€384.1 million) to Jaguar’s and Land Rover’s pension funds. The two companies employ 16,000 workers directly, as well as thousands of other workers depending on the supply and support chains of the car manufacturers. The Indian conglomerate Tata, which also owns the Anglo-Dutch steelmaker Corus (UK0703049I) and Tetley Tea, stated that it did not ‘anticipate any significant changes to Jaguar Land Rover employees’ terms of employment on completion of the takeover’. Furthermore, Tata emphasised that current production plans would be unaffected.
Jaguar cars are built at two sites in the UK, namely at Castle Bromwich in the Midlands and Halewood in Merseyside, while Land Rover shares Jaguar’s Halewood facility and has its own plant at Solihull near Birmingham. Jaguar narrowed its loss to about USD 550 million (€352.1 million) last year, down from USD 800 million (€512.1 million), by selling 60,000 cars. Land Rover earned about USD 1.2 billion (€768.2) from record sales of 226,000 vehicles last year. The current five-year business plan includes GBP 700 million (€890 million) of investments in carbon dioxide (CO2) emission reductions.
Tata’s ownership of the two car brands should allow it to pool its lower-emission vehicles with those of the British marques for regulatory purposes if, as expected, it begins large-scale exports to Europe. The deal offers Tata potential synergies from using the combined capacity of Jaguar and Land Rover, strengthening its existing manufacturing platform and component sharing arrangements with the Italian car manufacturer Fiat, in addition to directly expanding its presence in the premium car market. Ford will continue to supply Jaguar and Land Rover cars with engines, stampings and other vehicle components for a number of years.
Trade union reaction
The joint General Secretary of the trade union Unite, Tony Woodley, stated that if Jaguar and Land Rover had to be sold, then Tata was the best option. Concerns had been raised about Tata because of its potential to source components or manufacturing from overseas, but the trade union was also worried that a private-equity buyer might heavily rationalise operations. Local officials from the factories serving the two luxury brands opted to back Tata, as they felt that a manufacturer would offer more long-term security than OneEquity, the other leading bidder. Tata also won trade union backing by broadly endorsing the current five-year business plan.
‘We would have much preferred Ford to keep the companies in the family, so to speak, especially with Land Rover being so profitable’, Mr Woodley said, ‘but with the commitments Tata have given to the future of Jaguar/Land Rover and the long-term supply agreements for components, especially engines from Bridgend and Dagenham, we’re obviously pleased they are in the game’. The Unite national officer for the automotive industry, Roger Maddison, welcomed the deal as ‘really good news for the UK automotive industry and the thousands of people who work for Land Rover Jaguar and its supply chain’. He added that ‘Unite has secured written guarantees for all five UK plants on staffing levels, employee terms and conditions, including pensions, and sourcing agreements. The sale ensures our members’ futures and we look forward to working with Tata’.
Wider response
The UK Minister for Trade and Investment, Lord Digby Jones, underlined that the British government welcomed the ‘long-term commitment’ shown by Tata Motors in purchasing the Jaguar and Land Rover brands. He added that ‘the Tata Group is already a major investor in the United Kingdom, with recent acquisitions including Corus, and in automotive terms Tata Motors has also had its European technical centre in the West Midlands for several years’. A spokesperson for the regional employer association for engineering, manufacturing and technology-based industries, EEF West Midlands, highlighted that all workers would be relieved. ‘Reports that Tata Group will stick to the existing five-year plan to invest in and develop the two businesses will also be welcomed by all’, according to the EEF West Midlands’ Chief Executive, Ian Smith. He further added that ‘the one thing both Jaguar and Land Rover require now is stability where they are allowed to plan for the future’.
James Arrowsmith, IRRU, University of Warwick