Car makers set for Mandelson aid summit

Jan 27 2009 by Jonathan Walker, Birmingham Post

Downing Street insisted Gordon Brown would not let Britain’s automotive industry die, as carmakers prepared for a summit with Business Secretary Lord Mandelson.

Jaguar Land Rover Chief Executive David Smith is expected to join a delegation of industry representatives meeting in Westminster to hear whether the Government has finally come to a decision on whether to offer financial support.

Ministers have repeatedly hinted they are ready to help firms such as Jaguar Land Rover deal with the effects of the economic downturn and the near-collapse of the banking system and the Prime Minister’s spokesman confirmed that the automotive sector would not be allowed to vanish, saying: “The Government does believe that the car industry is a sector with a strong future and we are determined to ensure that the car sector remains a permanent and integral part of our manufacturing base.”

However, there is still no agreement over a package of measures to help the automotive industry, despite speculation that an announcement is imminent.

Jaguar Land Rover has been asking for loans or loan guarantees, giving it access to credit while the banks refuse to lend. It insists this is not a bail-out, but is an urgently-needed substitute for money it would borrow when the financial markets were operating properly.

The Government is particularly keen to help Jaguar Land Rover because it has invested in research and development in the United Kingdom, with facilities at Whitley in Coventry and Gaydon in Warwickshire.

But Treasury officials combing the firm’s books have found it difficult to untangle the business’ complicated financial relationship with its parent company, Indian firm Tata Group.

Ministers are reluctant to commit taxpayers’ cash, even for loans, unless they are convinced the carmaker and its owner have done everything they can to help themselves and they are also determined to ensure that billionaire Ratan Tata, chair of the Tata Group, contributes what he can.

There are also reports that Ministers are reluctant to accept calls to make credit available to car finance houses, which offer loans to motorists, as these sell foreign-built as well as British cars.

Jaguar Land Rover has appointed Digby Jones, now Lord Jones of Birmingham and the former director general of the Confederation of British Industry, as their corporate ambassador.

Jaguar is due to launch its XJ flagship saloon car later this year, while Paul Cope, director of manufacturing, has revealed a “major announcement” is imminent on new models at Land Rover.

Speaking this weekend, he said: “We are not asking for a bail-out. That term to us is offensive. JLR is a healthy, viable business with great products. In 2007, we made over £300 million profit and, in the first half of last year, we again made around £300 million.”