Alun Thorne: JLR is right to feel aggrieved
Mar 19 2010 By Alun Thorne
When David Smith assesses his Christmas card list he may well be striking off one Lord Mandelson of Hartlepool and Foy.
In fact the former chief executive of Jaguar Land Rover’s milk of human kindness may have run a little sour towards all those involved in last year’s protracted and ultimately unsuccessful negotiations with the Government over trying to secure credit guarantees for the Midland manufacturer.
Mr Smith has since left the company and been replaced by former BMW executive Ralf Speth and one has to assume that his position was not helped by the Government’s refusal to help free up credit lines at reasonable rates for the luxury marque when it was in desperate need at the height of the credit crunch at the end of 2008 and the beginning of 2009.
What must now stick in the throat – not just Mr Smith’s but also his former bosses at JLR’s parent company Tata Motors – is that Lord Mandelson has now decided to break open the purse strings of his much-vaunted Automotive Assistance Programme and provide a €300 million loan guarantee to GM Europe to ensure it keeps production at its Ellesmere Port and Luton operations.
While the decision is undoubtedly welcome, not just for the thousands of Vauxhall workers in the UK but also for the country’s economy and the long term future of its manufacturing base, it seems more than a little perverse considering the Government’s attitude towards JLR and Tata during their negotiations little more than a year ago.
In announcing the loan guarantee for GM, the Business Secretary said the Government had always been committed to “stand foursquare behind Vauxhall” and went on to describe the company’s two plants as “excellent” with a “first rate workforce”.
According to the Lord, the UK needed “Vauxhall to thrive” and following their negotiations he was confident that the company was well-placed to do so – with their loan guarantee that is.
A far cry indeed from his pronouncements during the negotiations with JLR.
Despite warnings from the company and unions that JLR’s cash position was dangerously low and new funding needed to be obtained within days to tide it through the credit crunch which had seen the global car market disappear almost overnight, Lord Mandelson was categorical in his assertion that the state would act only as a “lender of last resort”.
“The Government cannot be the first call for help in these circumstances,” Lord Mandelson insisted. “If there is anything the Government can appropriately do for any such company, then they will have to meet – and pass – some pretty tough tests,” he added.
In the end JLR was able to leverage finance from a number of sources including the European Investment Bank, but one has to wonder why the cases of GM and JLR received such differing treatment and eventual outcomes.
In JLR’s case it seemed fairly obvious that the Government was unwilling to support a company that had just been acquired by one of the biggest industrial groups in the world, although it evidently hadn’t taken into account the huge investment Tata had already made in JLR or the parlous state of many of the other Tata businesses at that time.
Despite employing more than 7,000 workers in the West Midlands and thousands more elsewhere in the UK and retaining its position as one of the world’s favourite luxury car brands, the Government clearly felt it could live with the risk of not offering financial support.
In GM’s case there was undoubtedly a very real threat that the company could cease to exist at all at one point and at the very least any new buyer would remove its expensive UK operations.
In those terms one can understand and support the Government’s backing of Vauxhall in the UK but it may still live to regret its treatment of JLR.
The whole experience has undoubtedly left a bad taste in the mouth for all concerned on the Tata side of negotiations and, while one would hope that JLR’s main production will remain in the UK for the long term as this is a key part of its USP – albeit with one fewer plant over the next five years – the company has made it clear it will be increasingly looking to cheaper markets for its components as it looks to cut costs.
JLR may now be owned by an Indian conglomerate and before that an American one but its heritage and global status is as one of the few remaining British-based manufacturers and deserved better from the Government and if we can’t support one of the few jewels left in our manufacturing crown then what loyalty can we hope to expect from them?
