Pressure mounts on UK government to bail out Jaguar Land Rover

December 21st, 2008 - 8:29 pm ICT by IANS  

KPMGLondon, Dec 21 (IANS) There is now a virtual tug-of-war between the British government on the one side and a group of Labour MPs, unions and the British automobile industry on the other on the issue of financially bailing out the Tata-owned luxury car maker Jaguar Land Rover (JLR). The government clarified Saturday that there was no aid package on the anvil as yet and talks were still going on. But supporters of the car industry said delays in giving aid to JLR would not only affect its employees in terms of layoffs, but adversely impact the automobile industry as a whole.

The BBC quoted Business Secretary Lord Mandelson as telling the Observer that the Tata group must “look to their own resources” and that “the government cannot be the first call for help in these circumstances”.

“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 said.

However, JLR has reportedly said Tata Motors itself is under financial strain as it has seen its share price plunge this year, and the company’s market capitalisation is now approximately half the value of the sum it paid for JLR.

David Smith, the chief executive of JLR, is understood to have told officials from the Department of Business, Enterprise and Regulatory Reform (BERR) that it will have no choice but to cut “certainly hundreds and probably thousands” more jobs, according to people close to the discussions, the Sunday Telegraph has reported.

The company has already axed 2,000 posts since its takeover by Tata Motors earlier this year.

Lord Mandelson has assembled a team of advisers from KPMG, an accounting firm, and investment bank NM Rothschild to advise him on the increasingly fraught situation at JLR, which is understood to have requested a package of financial assistance worth about 500 million pounds ($750 million).

Sources close to the BERR (Department for Business, Enterprise and Regulatory Reform) cautioned Saturday that the government had still not made a decision about whether to give the green light to a rescue package for the industry.

A group of Labour MPs from the West Midlands, where the JLR is located, is mounting pressure on the government to act fast. One of them, Richard Burden, chair of the all-party automotive group, said any further aid delays will affect the entire industry.

“The motor industry contributes a huge amount to the UK, with a turnover of 51 billion pounds ($76 billion), 840,000 jobs and 11 percent of the UK’s exports. There are more than 40 companies manufacturing vehicles in the UK and this is supported by a vast network of supply-chain and performance engineering firms,” Burden said.

Richard Lambert, director-general of the Confederation of British Industry (CBI), said taxpayers could afford to provide short-term loans for ailing firms in the UK because 800,000 British jobs overall were reliant on car making. “This is not money that’s being given away, it’s money that will be repaid.”

Derek Simpson, joint general-secretary of the Unite union, said the industry needed financial aid “within days”. He added: “It is simply no good bailing out the banks if the banks won’t then bail out business.”

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