Press Report : LDV on the brink of administration
Jonathan Guthrie, FT.com, 29th April, 2009
Birmingham van maker LDV has announced it will enter administration on May 6, a move likely to result in several thousand job losses.
The company, which is owned by Russian oligarch Oleg Deripaska’s GAZ Group, said that it had given up any hope of receiving a small bailout of £4m-£6m from the Government. It is understood that chances of selling the business as a going concern to foreign investors are regarded as slim.
The most likely outcome is now that the assets of the company, including production machinery, will be sold abroad. The long-foretold closure of the van maker will increase unemployment in the West Midlands, the region worst-hit by the recession. LDV provides 850 jobs directly and supports several thousand others at dealers and suppliers. The factory is in Washwood Heath, a deprivation black spot in a city where unemployment is already high. It lies within the constituency of cabinet minister Liam Byrne.
Gordon Brown confirmed the Government had held talks with LDV. ”We have had very substantial talks with the company, LDV. We have tried to be of help for them. We have said that there is a range of government support available for them if they have a business model that we can work with and be able to support,” he told MPs at Prime Minister’s questions.
According to one interpretation of events, LDV has been doomed to expire without government assistance ever since Peter Mandelson went to a party on the yacht of its owner, the Russian oligarch Mr Deripaska, last summer. The controversial Labour politician later returned to government as Lord Mandelson, Minister for Business. This made it hard for the government to give state aid to LDV without provoking accusations of cronyism.
According to one interpretation of events, LDV has been doomed to expire without government assistance ever since Peter Mandelson went to a party on the yacht of its owner, the Russian oligarch Mr Deripaska, last summer.
An LDV official said that there was “no element of brinkmanship” in announcing the administration a week in advance. He said that the move had been prompted by fears the news would leak before workers could be informed.
Erik Eberhardson, Chairman of the Supervisory Board of GAZ, the automotive industry group owned by Mr Deripaska, had attempted to mount a buyout of LDV that required a £20m-£30m bridging loan. However, talks with government were unproductive, with responsibility for dealing for the request swapped between junior ministers. Mr Eberhardson planned to gradually switch LDV into electric van production.
Critics point out that LDV has a long history of making losses and lacks economies of scale in a highly competitive vans market badly hit by the slump in the construction industry. Allowing the business to expire without last-ditch taxpayer-funded support will bolster the Government’s claims that it does not bail out weak businesses. Supporting larger, more electorally-significant companies, such as Jaguar Land Rover may become correspondingly easier.