Ford Motor Co.'s (F) long-awaited sale of its Jaguar and Land Rover brands removes a financial drain and major distraction for the U.S. auto maker as it continues its push to restore profitability.

Ford's decision to rid itself of the two luxury brands - for $2.3 billion, or less than half of what it paid to acquire them - will save the auto maker hundreds of millions of dollars annually on items such as engineering costs, particularly related to regulations to cut tailpipe emissions; advertising; the upkeep of dealerships; and warranties.

It will also allow Ford, which posted more than $15 billion in net losses over the past two years, to focus on development of its core high-volume brands, a key area of emphasis for Chief Executive Alan Mulally.

"Their success depends on sales of Ford, Lincoln-Mercury, Mazda and Volvo, not on Land Rover and Jaguar," said Mike Robinet, an analyst at automotive industry consulting group CSM Worldwide in Northville, Mich. "Ford would have been continually pumping capital into Jaguar and Land Rover just to keep the brands alive and relevant."

The Dearborn, Mich., auto maker has been in restructuring mode the past two years, trimming jobs and scaling back production to cut costs and match its eroding market share in North America. The company, which last year was surpassed by Toyota Motor Corp. (TM) as No. 2 in U.S. sales for the first time, has seen its sales fall further in 2008 as U.S. consumer confidence gets battered by tight credit conditions and high fuel prices.

Ford managed to reduce its net losses by nearly $10 billion in 2007, thanks to the cost cutting and strong performances of its operations outside the U.S. But with U.S. car industry sales expected to hit their lowest level in at least a decade in 2008, there is a premium on Ford's ability to continue finding ways to operate more efficiently. The company, which is in the midst of a new round of employee buyouts, hopes to return to profitability by 2009.

"The selling price isn't the issue," said Bernie McGinn, president of McGinn Investment Management in Alexandria, Va. "The issue is that Jaguar and Land Rover are now off the company's books and Ford can move forward to do what they need to do while focusing on fewer brands."

McGinn, who manages 300,000 Ford shares, said he backs Mulally and plans to continue buying the company's stock.

The sale of Jaguar and Land Rover to India's Tata Motors ltd. (TTM) follows the sale of Ford's Aston Martin luxury brand last year to a consortium of investors including Kuwait's Investment Dar Co. for $925 million.

Ford last year considered putting Volvo, its last remaining European luxury brand, up for sale, but Mulally opted to develop a plan that would improve the company's financial performance and brand image.

Mulally, who joined Ford as CEO 18 months ago after a long career at Boeing Co. (BA), has placed considerable emphasis on staying focused on the company's core brands and improving coordination of Ford's global operations.

Ford's two-decade foray into the European luxury market didn't turn out as planned, particularly with Jaguar, which has been unprofitable for years. Last year, Jaguar sales fell 19% globally.

Ford acquired Jaguar for $2.5 billion in 1989 and Land Rover for $2.75 billion in 2000. The deal to sell the brands, which followed a nearly nine-month sales process, is expected to be made final with regulators sometime during the second quarter.

The cash generated by the sale will provide a boost to Ford's liquidity, though analysts downplayed the significance of the cash infusion. Ford's net proceeds from the sale will be $1.7 billion, since the company will contribute approximately $600 million to the Jaguar/Land Rover pension plans upon completion of the sale.

"The proceeds are not trivial, but do not radically alter Ford's liquidity situation either," Morgan Stanley analyst Jonathan Steinmetz said in a research note Wednesday. "Put differently, at our projected burn for Ford in 2008 the proceeds are equivalent to less than nine months worth of cash burn."

Rating agency Standard & Poor's noted that the proceeds will "bolster Ford's adequate liquidity," but doesn't alter the company's credit worthiness. Ford ended 2007 with $32.7 billion in cash and marketable securities.

Keeping the brands would have given Ford more headaches in the near future as emissions standards continue to increase both in the U.S. and Europe, said Aaron Bragman, an analyst with Global Insight, who is based in Troy, Mich.

"Both of these vehicles have V-8 engines, the Land Rover is one of the heaviest vehicles out there and bringing both of these vehicles into compliance would have required a lot of technology and engineering research. I don't know how Tata is going to do it."

The accord calls for Ford to continue supplying Jaguar Land Rover with powertrains, stampings and other vehicle components, plus various technologies, such as environmental and platform technologies. Ford will also provide engineering support, research and development, plus information technology, accounting and other services.

Ford Motor Credit Co. also will provide financing for Jaguar and Land Rover dealers and customers for as long 12 months.

Ford shares, which have lost about a quarter of their value over the past year, closed Tuesday at $5.88, down 12 cents, or 2%, on the New York Stock Exchange, tracking a broader downturn for U.S. stocks.

__________________
Submissions | Hip-Hop 4 Obama