Press Report : Car-maker failure could threaten pension lifeboat
Philip Aldrick, Daily Telegraph, 22nd December, 2008
Jaguar Land Rover, owned by India’s Tata, is in talks with the Government about a £500m-£1bn state loan to help it through the downturn, protecting 75,000 jobs, while Vauxhall’s US parent General Motors has been teetering on the edge of collapse.
Despite the talks, administration remains a live possibility after Business Secretary Lord Mandelson yesterday said Jaguar Land Rover would have to “look to themselves and their own resources” before the Government would intervene. GM was given a lifeline on Friday after securing an $8bn (£5.4bn) US state loan, but the deal was conditional on a restructuring.
Administration, while costing thousands of jobs, would also imperil the UK Pension Protection Fund. John Ralfe, an independent pensions consultant, has calculated the combined deficit of Jaguar, Land Rover and Vauxhall pension schemes would be £1.5bn in the event of collapse – £600m at Vauxhall, £500m at Jaguar and £400m at Land Rover.
The PPF, which guarantees 90pc of scheme members entitlements, would face a loss of “£400m-£500m depending on recoveries from the liquidation”, he said. Last year, Vauxhall’s final salary schemes had a deficit of £164m and Jaguar’s a surplus of £125m. In 2006, the most recent data available, Land Rover a deficit of £71m.
Mr Ralfe said deficits have ballooned largely because of the 35pc fall in equity values this year. The PPF already has a shortfall of £517m, £160m of which is from Rover – its single largest scheme with 6,000 members. The PPF is bracing for a raft of new collapses, and plans to charge higher risk companies higher levies in future.
[Source: Daily Telegraph]