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Ford Says “Tata” to Jaguar, Land Rover

Ford’s grand experiment has come to an end. With the sale of its Jaguar and Land Rover brands to the Indian automotive upstart, Tata Motors, the struggling U.S. automaker has effectively abandoned its grand goal of becoming one of the world’s leading luxury car manufacturers.

Ford’s release was terse, and notably, no senior officials were available, on the record to discuss the $2.3 billion deal, which is expected to run into little trouble winning regulatory approval,

"Jaguar and Land Rover are terrific brands," declared Alan Mulally, Ford’s president and CEO, in a prepared release. "We are confident that they are leaving our fold with the products, plan and team to continue to thrive under Tata’s stewardship.”

Thrive is not necessarily a word one heard often, however, inside the Ford empire, and particularly at Jaguar. Ford acquired the British marque in 1989, for a hefty $2.5 billion, outbidding American rival General Motors and winning the appreciation of the British government, which had effectively nationalized most of its collapsing auto industry in the decades before.

Ford officials quickly discovered they had a mess on their hands, a brand that had been starved of capital, as well as effective leadership, by its government-appointed overseers. Products were horribly outdated, assembly lines were frighteningly inefficient, and quality only underscored the conventional wisdom about British products.

Pumping money and management talent into the new subsidiary, Ford began to believe it could turn Jaguar into a truly global brand, and a competitor to the likes of Germany’s BMW and Mercedes-Benz. Ford ordered a rapid expansion of the Jaguar line-up, adding the midsize S-Type “saloon” and the compact X-Type. Former CEO Jacques Nasser, began boasting that Jaguar could push sales up to 200,000 units annually, and perhaps double that again. But at the same time, Jaguar became a political football within the Ford system. To keep its British unions happy, following the closing of the huge Ford Dagenham plant, Jaguar was ordered to take control of yet another underutilized U.K. factory. So, suddenly, the luxury maker was operating three inefficient plants, while producing less cars, in total, than just one of those would normally produce if run well.

But Nasser was on a mission, and in 2000, he acquired Land Rover for $2.7 billion. (That deal followed another high-profile purchase, the $6.45 billion takeover of Swedish manufacturer Volvo AB’s automotive operations.) Like Jaguar, Land Rover was a mess, and a particularly complicated one. In this case, the seller was BMW, which had bought both Rover’s cars and light truck business, a few years earlier. But despite its own grand strategy, Rover continued losing sales and racking up billions in losses. Ford took the SUV operations, Rover’s car group went to a British start-up company that quickly failed.

As with Jaguar, Ford pumped a hefty sum into Land Rover, hoping to shore up its position as the ultimate luxury sport-utility brand. Though Land Rover continues to face problems – notably lagging on the quality charts – it has done markedly better in the market, repeatedly setting new sales records, both in the key U.S., and global markets.

Nasser’s strategy was to combine Jaguar and Land Rover, as well as Volvo, and the tiny Aston Martin, into a new, semi-autonomous operation, dubbed the Premier Automotive Group. Initially, PAG even absorbed Ford’s American-based Lincoln and Mercury brands, though they were quickly spun back out, putting the focus on overseas – and mostly British – brands.

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