Ford's Jaguar Sale Hits Perception Problems

A U.S. dealer representative doubts that two India-based suitors would be good for the brands.
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Jaguar dealers in the U.S. may soon find that an Indian owner of the luxury auto brand can do a better job of running the business than

Ford

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.

As Ford nears a deal to sell Jaguar and Land Rover, two brands from its Premier Auto Group division, two India-based companies,

Tata Motors

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and

Mahindra & Mahindra

, are in the bidding.

But a representative for U.S. Jaguar dealers has expressed support for a third bidder -- One Equity Partners, a U.S. private-equity firm owned by

JPMorgan

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-- and raised eyebrows by suggesting that an India-based owner could be an image problem for Jaguar.

"I don't believe the U.S. public is ready for ownership out of India of a luxury car make," Ken Gorin, chairman of the Jaguar Business Operations Council, told

The Wall Street Journal

last week. "And I believe it would severely throw a tremendous cast of doubt over the viability of the brand."

With the U.S. trade deficit as bloated as ever, foreign ownership of U.S.-based assets is on the rise. Moreover, the country is gripped by concerns that huge emerging economies in India and China could soon eclipse its global dominance, and Gorin's comments fit into a larger trend toward a backlash of protectionism that is taking root in public opinion.

Jaguar, meanwhile, is a British brand that Ford acquired in 1989. The company bought Land Rover, also British, from BMW in 2000. When Ford was cobbling together its Premier Auto Group, the luxury brands were viewed as businesses that could help the No. 2 U.S. automaker offset its difficulties in the low-end market in North America.

Last year, the Premier Auto Group posted a pretax loss of $2.3 billion, widened from a loss of $1.6 billion in 2005. The unit's results have improved this year, but Ford is looking to sell the businesses to finance its restructuring efforts in North America.

Across the pond, British dealers and auto workers are rejecting Gorin's comments.

"After speaking to most of my members, we are very happy with any of the three companies," says James Brearley, chairman of the British Jaguar dealers' council. "We wanted assurances over the future and product plans, and they all have given that."

Union leaders at Land Rover and Jaguar's U.K. factories voted late last month to support the Tata bid, citing the best interests of their members in having an owner with an established presence and a background in manufacturing.

Tata Group, owner of Tata Motors, is one of India's most venerated family-owned businesses. It includes the nation's largest software company, a prestigious line of hotels and a network of steel businesses like the U.K.-based Corus Group, one of the world's leading aluminum and steel companies, which Tata acquired in January.

David Good, Tata's chief representative in North America, rejects Gorin's comments as "completely off base."

"The notion that somehow an Indian acquisition of an international brand is going to in some way dilute the brand is completely mistaken," says Good, citing the company's acquisition of Tetley, an iconic British tea company that the firm bought in 2000.

"A lot of people don't even know that

Tetley is owned by an Indian company," says Good. "They still think of it as a British company, and in a sense it is, because it's still a British tea company. It just happens to be owned by an Indian company now. There have been many foreign takeovers of high-end American brands and they're doing very well and are recognized luxury brands, whether they're hotels, cars, watches or whatever they might be."

Ford spokesman Tom Hoyt says the automaker expects to wrap up the sale of Jaguar and Land Rover early next year, and he declined to comment on speculation that a lead bidder would be named this week.

The Tata bid has been embraced by organized labor in the U.K., which puts pressure on Ford to do the same, since it will remain a major employer in the region.

Hoyt declined to comment on whether Ford would take Gorin's comments under consideration in the bidding process.