Ford Motor Co. is selling its storied Jaguar and Land Rover brands to India’s Tata Motors Ltd. in a deal that will net the U.S. automaker $1.7 billion — roughly a third of the price it paid for the two luxury brands.

The deal announced Wednesday will expand the Indian carmaker’s reach around the globe and give Jaguar and Land Rover badly needed capital to update and expand their product lines.

The agreement had been in the works for months as cash-strapped Ford sought money to fund its turnaround plan.

Tata will pay $2.3 billion for the British brands, but Ford will pay about $600 million into the Jaguar-Land Rover pension fund when the deal closes, Tata’s statement said.

Ford bought Jaguar for $2.5 billion in 1989 and Land Rover for $2.7 billion in 2000. But the Dearborn-based automaker has been struggling and wants to focus on its main brands.

Selling the companies at such a loss clearly shows buying them was a mistake for Ford, said Erich Merkle, vice president of auto industry forecasting for the consulting company IRN Inc. in Grand Rapids.

Jaguar never has made a profit under Ford, Merkle said.

“You have to cut your losses at some point. It’s been draining them of cash and resources,” Merkle said.

The net proceeds aren’t enough to rescue Ford’s finances, but the sale will allow the company to focus on its core Ford brands, Merkle said.

Tata should have the cash to save the brands and develop new products to better compete with luxury automakers such as BMW AG, Merkle said.

Tata said it expects no significant changes in the terms of employment for Jaguar and Land Rover’s 16,000 workers. It said the transfer of the brands would take place at the end of the second quarter.

The sale raises the Tata conglomerate’s profile on the world stage, said V.G. Ramakrishnan, the lead auto analyst with the consulting firm Frost and Sullivan India.

“This is another important landmark step of showcasing that Indian companies are arriving on the global landscape,” Ramakrishnan said. “Many people will see this deal as the future of things to come — you will see more companies out of India acquiring global companies. They want to be seen as major global players.”

In England, some workers were upbeat about the change, but others worried about the future.

“People seem to be generally happy about the buyout. Tata has a reputation as a business which is going places and has ambition to be a major market force,” said Lee Betteridge, a 34-year-old Jaguar toolmaker.

“I think Ford may have made a mistake as the companies are turning around and making profit, especially Land Rover,” he said.

“I am pleased I have kept my job. But for how long?” asked Paul Hoyte, 35, a Land Rover worker. “There has been a lot of cost-cutting under Ford. Will Tata cost-cut? Maybe I will lose my job in the future.”

Tata Motors built the first fully Indian-designed car. In contrast to the high prices that Jaguars and Land Rovers sell for, Tata recently announced plans to build a $2,500 car later this year. Jaguars in the U.S. have sticker prices starting around $50,000 and can cost nearly twice that amount.

Ford CEO Alan Mulally said in a statement that the British brands are leaving Ford in good shape.

“Now, it is time for Ford to concentrate on integrating the Ford brand globally, as we implement our plan to create a strong Ford Motor Company that delivers profitable growth for all.”

Tata said Ford will continue to supply engines, transmissions and other components for five to nine years. Ford also will continue to provide environmental and other technologies as well as engineering support.

Tata Chairman Ratan N. Tata said his company will try to build on the brands’ heritage, keeping their identities intact.

C. Ramakrishnan, Tata’s chief financial officer said the company had secured a 15-month, $3 billion bridge loan from a small syndicate of banks. He said Tata expects to replace that financing with a mix of equity and debt during the next several months, including “unlocking value” from some of its investments in subsidiaries.

He acknowledged Jaguar’s financial difficulties but said the brand is turning around and he expects it to be profitable within two years.

“Land Rover is a highly profitable company … and Jaguar is well on its way,” he said in a conference call with reporters Wednesday.

Ramakrishnan said the brands’ existing management will continue.

Tata Motors is part of Tata Group, India’s oldest and largest conglomerate. The family business is owned mostly by Tata-funded charitable trusts. A substantial portion of the group’s income is channeled into various philanthropies that have helped build some of the country’s finest institutions, including India’s first cancer hospital.

Among Tata’s holdings are steel makers and a consulting service that does software engineering and other work for western firms.

Roger Maddison, an official with Unite, Jaguar and Land Rover’s main labor union, said the deal is good news for the automakers’ employees as well as those who work for parts suppliers.

“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,” Maddison said in a statement.

Mulally has said the company would invest the proceeds from the sale in quality and product development at Ford.

Ford named Tata as the preferred bidder for the British automakers in January, essentially dismissing two other bids.

Cash-hungry Ford, which lost $12.6 billion in 2006 and $2.7 billion last year, has been looking to sell Jaguar and Land Rover for months.

It has mortgaged assets to continue operations and expects to burn up $12 billion to $14 billion until 2009, when it plans to return to sustained profitability.

Jaguar and Land Rover are strained by unfavorable exchange rates and high production costs in Britain.

Ford had hoped to turn Jaguar, which was founded in 1922, into a high-volume brand that could compete with BMW and Mercedes-Benz. But its entry-level X-Type sedan, introduced in 2001 to lure younger buyers, sold poorly and was slammed for its conservative styling. Jaguar’s U.S. sales were down 24 percent last year.

Land Rover, which was founded in 1948 — the year after India gained its independence from Britain — has fared better thanks to popular products such as the Range Rover Sport and LR2. Land Rover’s U.S. sales were up 4 percent last year. But unlike Jaguar, which has improved its quality rankings under Ford, Land Rover placed last in J.D. Power and Associates’ rankings of initial quality and dependability in 2007. The rankings measure problems per vehicle after 90 days and again after three years of ownership.

Ford shares edged up a penny to $6.01 in morning trading Wednesday. They have traded in a 52-week range of $4.95 to $9.70.

As the pressure to reduce fuel consumption and carbon dioxide emissions continues unabated, it’s not just gasoline engines that are getting the right-sizing treatment. The diesel engine is set to shrink as well, at least at BMW and Mercedes-Benz. Both manufacturers currently offer diesel V-8s of 4.4L and 4.0L sizes respectively in their top models. However, both companies are likely to start replacing their current diesel model range with newer, smaller displacement alternatives with new boosting technology that will improve the power while reducing fuel consumption. That means following the path BMW has been traveling recently with sequential twin turbocharger systems such as the one on the 123d. These setups use a pair of different sized turbos that help to enhance torque at both low and high revs. This will allow the V-8 to be replaced by inline and V-6 cylinder engines while current six cylinder applications will go to fours. All of these will also likely be combined with mild hybrid systems for even more improvement. Besides the improved efficiency of the smaller engines, weight will also be reduced, further enhancing fuel economy. So far, the one exception to this trend is Audi which just announced production of the Q7 V-12 TDI with its new 6.0L V-12 diesel. That however will be a very low volume application and more mainstream units will probably go the downsizing route.

MAGNA STEYR presents the third concept vehicle in the MILA innovation family at the 2008 Geneva Motor Show. The MILA Alpin is a compact off-roader with a body specially designed for integrating various different types of alternative drives. This means: Excellent all-terrain capability, wide-ranging uses and emissions of under 100 g CO2 per kilometer. Creating an attractive vehicle was by no means MAGNA STEYR’s only priority in the MILA Alpin project. The entire product development process was also designed always to make assembly as cost-efficient as possible - whatever the market demands.A new vehicle segment

Its unique configuration makes the MILA Alpin a vehicle that stands out because of its excellent all-terrain capability and outstanding rough road characteristics. As a result, it is not only suitable for recreation but also as a utility vehicle for special uses. What allows such wide-ranging applications is the mid-engine layout with a low-cost, but effective all-wheel drive system. Its climbing ability is impressive: 100% or 45 degrees. On the road, too, exceptional handling makes the MILA Alpin great fun to drive. What’s more, the hybrid drive using natural gas reduces the impact on the environment.

The MILA Alpin’s shape language also adds to its attraction - inspired by Nature, its lines are as clear as rock and ice.

Engineering

The engineers at MAGNA STEYR set themselves the challenge of developing an off-roader in several variants with maximum climbing ability - all at low cost. And they certainly succeeded.

The frame consists of straight sections, which are made of different materials to guarantee low weight and enable a flexible body concept. Modular design makes it easier to use components and systems from volume production and combine them with various different innovative modules and optional extras. Thanks to independent suspension and ESP, the chassis guarantees safe on-road characteristics. The mid-engine layout ensures good traction. The considerable ground clearance, large overhang angles, option of locks in the transfer case and axle drives, and low crawling speed all go to make driving safe and relaxed off the road.

A higher sitting position that is relatively far forward and large panoramic roof give the driver and passengers perfect visibility. The MILA Alpin has 3 + 1 seats.

There is also the option of a CNG drive, a hybrid or a small, supercharged gasoline engine.

From concept to reality

To manufacture a vehicle with low production volume and high number of variants economically, tool investment has to be reduced as far as possible. This fact in particular was taken into account when designing the MILA Alpin. Given the modular design, automation can be kept at a low level and, at the same time, flexibility in assembly at a high level. The MILA Alpin concept can therefore be used for volume production without any problems - especially by a flexible specialist in engineering and vehicle assembly, such as MAGNA STEYR. The requirements for production have been met by optimizing the overall process and the individual systems at every stage of development. This approach also enables the costs of any subsequent modifications due to market demand to be kept down to a minimum.

All the innovative components, such as energy storage systems, and the expertise for hybrid drives stem from in-house advance development.

MAGNA STEYR has developed and designed the vehicle to be brand neutral. It can therefore be built together with various OEMs.