Tata, Ford Set Date for Jag/Land Rover Sale: Who Wins?

The date is set. And these two (er, three?) crazy kids are finally gonna tie the knot… as soon as the divorce is final.

Yep, it looks like the Tata Motors (TTM) buyout of two of Ford’s (F) European luxury divisions is finally here.

After months of nitpicking over details, Tata and Ford have finally come to an agreement about Jaguar and Land Rover. And Tata will be buying the two car lines for about $2 billion. Ford is just waiting to brief its European employees when they return to work after the Easter holidays tomorrow.

Tata is borrowing $3 billion, arranged through its advisors Citigroup (C) and JP Morgan (JPM), and after buying the two carmakers, we can only assume it will use the leftover billion to develop the brands.

Foreign Investment: Can Tata turn a profit?

The sticky trap for the sale seems to have been the unions involved. And the deal they’ve gotten out of two companies looks like a pretty sweet one. Tata has promised not to move production to a cheaper labor market. Ford has to contribute to the union pension fund (although how much it will drop in the union bucket hasn’t been announced). And Tata will keep buying its Jag and Land Rover engines from Ford.

With all of the restrictions weighing down Tata when it does take the Jag/Land Rover wheel, you have to wonder if it’ll be able to make any money from the two luxury producers.

Ford hasn’t released individual results from the two companies, but the entire Premier Automotive Group, to which Jaguar and Land Rover belonged, made $504 million in 2007. That doesn’t sound too impressive, considering the group comprises three European car companies (Jag, Land Rover, Volvo, and a fourth, Aston Martin, before it was sold into private ownership a year ago).

Foreign Investment: Land Rover wins, Jag… not so much

Land Rover’s sales have been at record levels, after a major push into the U.S. market in the last three years. And analysts assume it’s highly profitable, despite the fall of the dollar against the pound. But a U.S. recession could slam into the company’s sales head on and demolish any profits it’s been seeing.

Jaguar, on the other hand, hasn’t seen the same sales. Its current profitability is in question, and a recession could only make things worse.

With times getting pretty tough in the two car companies’ major growth market, the U.S., you have to wonder what Tata could possibly be thinking committing itself to luxury manufacturers as its first step westward. It would take a magician to turn the current economic situation into higher profits.

But consider that Tata can turn a profit on a one lakh (about $2,500) domestically produced car in India, and you start to believe in magic.

TTM gained 6% on the news that the merger would finally come to pass, closing at $16.18 yesterday.