KEY POINTS:
Arab investment funds are targeting Jaguar and Land Rover, the luxury car marques that US owner Ford has put up for sale for more than US$6 billion ($7.8 billion).
Abu Dhabi's Mubadala Development Company, already the owner of 5 per cent of Ferrari, and Dubai International Capital, which
controls a US$1 billion stake in DaimlerChrysler, have instructed their financial advisers to draw up plans for bidding for one or both of the companies, which employ 16,000 British workers at Midlands factories.
Trophy car brands are a favourite for Middle Eastern investors - last month a Kuwaiti investor put up US$480 million to help buy Ford-owned luxury car maker Aston Martin.
Gulf funds eyeing Jaguar and Land Rover may receive a friendlier reception from unions than private equity groups, which are also hovering.
A union official said: "We would want assurances on investment and jobs, but frankly, anything would be better than private equity."
The hostility to private equity firms was demonstrated in 2000 when a blizzard of poor publicity contributed to the failure of Alchemy to acquire Rover.
Private equity groups interested in Jaguar and Land Rover could include Blackstone, Apollo and Cerberus Capital, which recently bought US carmaker Chrysler.
Investment funds from the Gulf region, awash with petrodollars, have been keen to diversify and have been buying up British businesses. These have included Madame Tussauds, P&O and Viridian, the electricity supplier in Northern Ireland.
Ford has been forced to put Jaguar and Land Rover up for sale in an effort to repair its balance sheet after losing more than US$12 billion last year as Japanese rivals chipped away at its domestic market.
Industry sources say no major manufacturer wants to acquire Jaguar or Land Rover, with the possible exception of Hyundai of South Korea.
Tony Woodley, boss of Britain's biggest union, Unite, has called for Government intervention to prevent the companies being bought by private equity. Unite says carmaking is of "national strategic importance", not least because of the jobs at risk.
It is thought that Ford wants to sell the brands as a pair as they share design, production and research facilities. Ford's decision to sell Land Rover surprised analysts as it has performed strongly, unlike Jaguar, which has drained the parent company of cash since it was bought in 1989.
- OBSERVER