Press Report : Closure threat remains for JLR assembly plant

John Cranage, Birmingham Post, 12th August, 2009

The threat of closure still hangs over one of Jaguar Land Rover’s three assembly plants despite yesterday’s announcement that the luxury carmaker’s Indian owner had secured bank funding to help it through the recession.

Tata Motors, which bought JLR from Ford for £1 billion in June 2008, would not say how much money it had raised or where from. However, the Birmingham Post understands that the cash, in the region of £175 million, will come from a consortium that includes “nationalised” banks Lloyds and RBS.

After months of tortuous negotiations with Lord Mandelson’s Department for Business, Innovations and Skills over a tide-over loan or loan guarantee at commercial rates, Tata said it had “successfully concluded” parallel talks with unnamed commercial banks.

The money is on top of the £75 million that Tata is getting from Bank of Ireland subsidiary Burdale Financial by way of a mortgage on Land Rover’s stock and receivables. Tata said it no longer needed help from the taxpayer and expects to guarantee an additional £340 million advance from the European Investment Bank to develop a new generation of low emission cars from its own resources.

It is a positive sign for our business that we have been able to attract sufficient funding for our short-term needs through normal commercial means.” David Smith, Chief Executive, Jaguar Land Rover

JLR, Britain’s biggest manufacturing employer, has struggled for about a year after being hit by the double blow of the global credit crunch that saw its normal credit lines dry up and a slump in sales due to the recession. Commentators said yesterday’s announcement was a sign that liquidity was now beginning to flow again through the financial markets.

Tata itself spoke of a “positive trend” in financial markets and “improvement in general liquidity”, while JLR Chief Executive David Smith said: “It is a positive sign for our business that we have been able to attract sufficient funding for our short-term needs through normal commercial means.”

Prof. Badack Yazdami, the Dean of Nottingham Business School and a former Head of Product Development operations at JLR, welcomed yesterday’s development, but stressed the loan would help to ease the company’s short term cash flow needs, not secure its longer term future.

Prof. Yazdani said: “This is a sound business that in normal conditions could go to a bank and ask for favourable finance. This will help them to run the business but it may mean there will be some business restructuring to be done.”

Halewood is the most efficient and effective plant in the JLR stable. It would be very bad to shut Halewood, but this part of the conundrum because it does not mean that Castle Bromwich and Lode Lane are not good. Tata has said it is committed to keeping all three plants, but all serious business people would have to consider.” Prof. Badack Yazdami, Dean of Nottingham Business School

The need to pare down costs could mean closure for one of JLR’s three factories, Castle Bromwich in Birmingham, Lode Lane in Solihull and Halewood on Merseyside. Such a development has been discussed for some time with Halewood thought to be the most vulnerable of the three.

In contrast with the two West Midland plants where the summer shutdown was cut from three weeks to two to start building up stocks of new models such as the Jaguar XJ, production at Halewood will stop for three weeks in September. The plant is also losing 300 jobs as the Jaguar X-TYPE, one of only two models built there, comes to a premature end.

But Prof. Yazdani said yesterday: “Halewood is the most efficient and effective plant in the JLR stable. It would be very bad to shut Halewood, but this part of the conundrum because it does not mean that Castle Bromwich and Lode Lane are not good. Tata has said it is committed to keeping all three plants, but all serious business people would have to consider.”

David Smith said: “We have been forced to take unprecedented actions through this tough economic crisis and the environment is still very challenging. It will continue to be so for some time to come and we will continue to take further actions to secure the future of the business.”

[Source: Birmingham Post]

Clive Goldthorp

About the Author:

Clive claims that his interest in the BMC>MG story dates back to his childhood in the 1960s when the family’s garage premises were leased to a tenant with an Austin agency. However, back in the 1920s and 1930s, his grandmother was one of the country’s first female Garage Proprietors so cars probably run in his genes! Admits to affairs with Alfa Romeos, but has more recently owned an 06/06 MG TF 135 and then a 15/64 MG3 Style… Clive, who was AROnline’s News Editor for nearly four years, stood down from that role in order to devote more time to various Motor Racing projects but still contributes articles on as regular basis as his other commitments permit.

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