Press Report : LDV saved as Government approves £5m loan
Jonathan Walker, Birmingham Post, 6th May, 2009
Thousands of jobs have been saved after the Treasury stepped in to provide a last-minute £5 million loan for Birmingham van-maker LDV. The deal, announced only hours before a High Court was set to put the firm into administration, allows Malaysian firm Weststar to buy the business.
Gordon Brown approved the loan in discussions with Liam Byrne (Lab Hodge Hill), the MP whose constituency includes the Washwood Heath plant. Ministers have won assurances from Weststar that production will remain in Birmingham, following concern that work could shift overseas.
Weststar, which already has a joint operation with LDV to import Maxus van kits for assembly and sale in the Far East, will invest in “green” technology, focusing on production of electric vans. The deal is expected to save up to 850 jobs at LDV and thousands more in the company’s supply chain.
However, Weststar still needs to complete the process of raising the cash it needs from investors. There is also no guarantee that no redundancies will take place. LDV was due to go into administration today (Wednesday) after running out of cash.
Weststar completed negotiations with LDV’s current owners, Russian firm GAZ, over the weekend. But it warned Ministers on Monday that it needed four weeks to conduct due diligence and raise £50 million from investors in Malaysia. The loan will cover LDV’s running costs, of around £1.2 million a week, until the deal can be finalised.
Mr Byrne has been lobbying Ministers in the Treasury and Department for Business and Enterprise to back LDV, and met Mr Brown in Downing Street yesterday. He said: “I am simply thrilled to bits that LDV now has a new future in its sights. I always said LDV could make it big in the green van market, which is why I fought tooth and nail to get more investors to the table, and Government help to close the deal.”
The Treasury had allowed LDV to delay tax payments of £2 million to give LDV time to find an investor, he said before adding: “And we got the Government’s promise of £5 million more to help a new deal go through.”
Business Minister Ian Pearson (Lab Dudley South) stressed that the loan needed to be repaid within the agreed time limit of four weeks. He said: “Weststar’s proposed purchase of LDV offers the only credible chance of keeping this manufacturing plant in the UK. Whilst completion of the deal is not certain, it would have been irresponsible of the government not to support it going forward. But this is a one-off bridging loan and it cannot be extended.”
Tony Woodley, Joint General Secretary of trade union Unite, said: “We are delighted at the government’s backing for this company. There’s a long way to go yet but now thoughts can turn to building a serious and successful future for this company, and to getting these men and women, who have not built a vehicle in months, back to work.”
Speaking before the loan was confirmed, LDV Chairman, Erik Eberhardson, told the Birmingham Post that the Weststar deal was the vanmaker’s best hope. Last night, he said: “I am very pleased that a deal has been put in place after the intensive discussions over the weekend. It is now vital to avoid administration so that Weststar and LDV have the best start for the future of the business.”
The Government previously refused LDV’s applications for short-term aid until its owner put it on a sound financial footing. But with the GAZ Group itself fighting for life and liquidity that was not going to happen. GAZ is controlled by Russian oligarch Oleg Deripaska, whose multi-billion pound fortune has been severely drained by the global recession and credit crunch.
Business Secretary Lord Mandelson has distanced himself from the talks following the disclosure that he had been a guest on Mr Deripaska’s yacht while trying to negotiate funds for the Labour Party.
The Washwood Heath factory stopped making vans in December after the global downturn sent sales spiralling downwards.
GAZ Group announced in February that it was looking for a buyer for LDV and Weststar and Indian automotive group Mahindra and Mahindra emerged as likely saviours after a management buy-out bid led by Mr Eberhardson failed to raise the necessary finance. Mahindra later withdrew, leaving Weststar the sole contender.
The company – which plans to reposition itself as a mainstream manufacturer of electric-powered vans – applied for an administration order a week ago after coming under pressure from some creditors, leaving it until this morning to find a buyer or go under.
[Source: Birmingham Post]