Press Report : Ratan Tata told to help pay for JLR recovery

Jonathan Walker, Birmingham Post, 19th December, 2008

Ratan Tata has some tough decisions to face

Ratan Tata has some tough decisions to face

Ministers are demanding the Indian billionaire behind Jaguar Land Rover owners Tata give up some of his personal fortune to save the businesses from collapse. Details of a potential deal to save thousands of the jobs in the West Midlands began to emerge after Business Secretary Peter Mandelson confirmed he was in talks about providing state aid to help the firms – but insisted there was no “open chequebook”. Ministers expect Ratan Tata, chairman of the Indian group which bought Jaguar-Land Rover in June for £1.7 billion, to contribute a share of the rescue package himself.

Jaguar Land Rover, which employs 16,000 people in Birmingham, Solihull and Merseyside, is hoping for taxpayer-funded assistance to help it survive the credit crunch. The Government is willing to help the business with loans or loan guarantees, allowing it to borrow from banks, but only if it can convince Ministers it is has already made the best use of its own resources. Negotiations are expected to continue over Christmas, as new figures from Society of Motor Manufacturers and Traders (SMMT) revealed the dire situation facing the car industry.

The primary responsibility for financing a company arises with those who actually own the company

The number of cars built UK factiories was 97,604 last month, down by 33 per cent on November last year, while commercial vehicle production slumped by 50 per cent. Almost 1.4 million cars have been built so far this year, a 2.7 per cent fall on the same period last year.

But Liberal Democrat leader Nick Clegg warned against giving state aid, claiming it would place the Government on a “slippery slope” and lead to demands for further bail-outs. The comments place him at odds with Liberal Democrat business spokesman Lorely Burt, the Liberal Democrat MP for Solihull, who this week called for “urgent financial help” for Jaguar Land Rover. Ms Burt told the House of Commons that the UK car industry was “hugely important” because it represented 11 per cent of the nation’s exports, and told Ministers: “They must do something and do it urgently – it cannot wait until after Christmas.”

However, Mr Clegg set out a very different policy, in an interview to mark his first year as Lib Dem leader. He warned: “If the Government does decide to give this taxpayer-funded help to one company it sets a precedent and it will be very difficult to refuse that assistance to other companies.” Solihull, which includes the Land Rover factory, is a highly marginal seat which the Lib Dems took from the Tories in 2005 with a majority of just 279.

By contrast, Conservatives were urging the Government to make credit available. Shadow Business Secretary Alan Duncan said: “These unique circumstances call for unique measures. The Government needs to be ready to step in and help sectors to allow them to survive the slump. “What companies such as Jaguar Land Rover and Nissan need is credit help, not unconditional bail-outs, to prevent those companies which are viable in the long-term going to the wall in the short-term.”

Speaking in the House of Commons, Chancellor Alistair Darling said the Government would do “everything that we can reasonably do” to support the beleaguered car industry, but added: “The primary responsibility for financing a company arises with those who actually own the company.”

David Smith, Chief Executive of Jaguar Land Rover, said: “We believe that Jaguar Land Rover plays a critical role in the car industry in the UK, supporting up to 75,000 jobs in our own business as well as our suppliers and dealers, and spending around £3 billion a year on research and development and purchasing in the UK.” He highlighted comments from the SMMT, which has warned the automotive industry faces “a national emergency requiring urgent action”.

[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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  1. Jonathan Carling Jonathan Carling says:

    There’s clearly some brinkmanship going on here. personally, I hope the Government pushes things as far as they can. If we end up giving money to Tata, we’ll also have to give it to GM, Ford, Honda, Nissan, Toyota and the rest. They’re all in trouble and they’ll all be watching what happens with Tata. The loser will be the taxpayer. Ultimately, if people aren’t buying the cars, the company will have to become more competitive.

  2. Robert says:

    If the government was to pile money into J.L.R why does this mean they will sell anymore cars? It is witout doubt keeping the workers employed, and this is a fantastic thing, but how can J.L.R possibly repay any loan when the fact remains that no one is buying the product. Jaguar in particular is a fairly weak product range, despite the XF and things at Land Rover are unlikely to improve as people are too narrow minded to see beyond the Gas Guzzling image of the Range Rover and Discovery 3. I would have thought that by loaning money to Ford and G.M plants in the U.K they have a much better chance of receiving some monies back. Indeed without wanting to speak out of turn, i suspect J.L.R is a very bad bet to loan/invest into just for the sake of it being a British Flag carrier.

  3. A Endsor says:

    Ultimately, this isn’t because JLR is unviable, it’s because turnover is low as it is for everyone right now. This isn’t even because the product is wrong and the future itself is very good. The situation, for which the UK government has to take a responsibility in part for, has been generated by external factors. This isn’t a repeat of MGR or BLMC, noone is selling cars, and Jaguar are one of the few manufacturers whose performance has in fact improved annually. No, a LOAN (not bailout) will not make people buy cars, the same as VAT cut has not remotely helped individuals, but to provide liquidity during the darkest era. It would take just one supplier to go bankrupt to halt many producers, JLR included because cash flow ceases and debts, wages and bills continue. When a supplier goes bust, the administrators force companies into buying back their own I.P’s and equipment back and charge them millions for the privelage. If 75,000 jobs are lost, the loss of company tax revenue will rival the size of the loan (which if course would then have interest on top too), but furthermore thats 75,000 people no longer paying income tax, as many households needing state support, and thats 75,000 plus dependents not injecting cash into the local economy, again more loss of tax, more loss of business viability and the whole systems collapse. I ask anybody to really consider this, because I don’t think people are looking at the amount of damage this will do. JLR is a business starting to fight for itself with some genuinely good product and excellent future, but this situation has been imposed on the business and the people. Working man always pays for the powers mistakes.

  4. david h says:

    JLR are not the only ones who went to the government cap in hand – The British Association of car Manufacturer’s went to the government. This included JLR, Honda, Nissan, Toyota, GM and Ford, but only JLR have been highlighted in the press.

    Everybody forgets that JLR in the last financial year made a profit of over a billion pounds, which was good considering that its biggest export market, the U.S. was already in recession. When Tata bought JLR from Ford, the profits had already been removed to help keep Ford afloat, and so it does not have any working capital.

    Also, if JLR and the other manufacturers are not given financial help by the government now, it would probably lead to even greater expense in increased benefit claims (i.e. jobs in motor industry go, less money for banks and reatil so more jobs let go).

    As long as this is a loan which is re-payable when the economy is growing again, then this will help keep the economy ticking over through a hard recession.

  5. Kevin says:

    But how long will £1billion last? And what if the situation is still bad in 6 months time? Do we give them yet more of our money? I don’t think so. If Honda can’t sell cars for £8k, then JLR haven’t got a hope of selling any at £20k.

    If Ratan Tata won’t stick his hand in his pocket then why the hell should the British tax payer? And that’s the view of most of the population. If JLR does all go to the wall then only Tata should be held responsible, not the government.

  6. Malcolm Elias says:

    It’s strange that in the UK we have these discussions when in other european countries the general public quite happily put up with their respective governments pouring money into their respective manufacturers. Even the German company I work for will receive state aid in the form of supporting the wage costs of having a 3 – 4 day week and we’re still in profit!

    What I wonder about is why our various state run institutions such as police are not required to buy British produced cars. I was in London the other day visiting my family and the metropolitan police would appear to only drive 5 series BMW’s. Surely this can’t be right why should the British taxpayers money be used to buy foreign cars when they could be driving round in JLR products. That would be a start I don’t know how many cars the government buys through its various departments but I’m sure it would help.

    Unfortunately I suspect that we will end up destroying what is left of our industry and trying to console ourselves with the fact that we still have a banking industry. Even though it is the latter which got us into this mess in the first place and now doesn’t appear to be willing to help us get out of it.

  7. didierz65 didier ziane says:

    why did he bother ? a year ago.. now’s time to get real, he owns jag and l-r!!! and all the problems tied to it!! how comes that a year ago no-one saw what was coming on? or is every one washing their hands and come cap in the same hand who were too good to speak to gvt!!! still leaves abitter taste to rover/mg lovers

  8. didierz65 didier ziane says:

    tata man isn’t so big a man now, is he? and then, once he gets profits if this happens one day, will he remember whom he owes it? as now, his company’s worth minus millions if not billions of £££££££££££. my tax money may save HIS company,and if so i want shares for my share of the profits if and when they happen as my money buys me shares. i’d have prefered my tax money to save rover/mg, even zo it would again come cap in hand to get more of my cash, at least it wasn’t a speculative deal when bmw pulled out,, now ratan is rattling

  9. didierz65 didier ziane says:

    if rover/mg was left to die why should we tax payers pay for mr tata ? after all mg-r was more “ours” than jag!!phoenix was the last hope, aftr bmw debacle… sure tax payers dosh has bee wasted by bucket loads in 70’s/80’s and bae just ucked out any life left in rover and made sure the bank balance was good!!! we now know it was at some vital expense . was this indian man thinking that he would be better than ford in running jag and l-r? t least pound is only worth 1.07 euro!! these days, make any uk product competitivel priced at least all over europe…

  10. Dave R says:

    As a former MG Rover employee, I can’t help but feel a small sense of deja vu. I now work at JLR and I can tell you that the two situations are quite different. MGR went to the wall because of bad management, missed opportunities and ultimately because the business was too small to develop new models. JLR has been hit by a the economic downturn created by the same bankers that won’t offer the normal finance companies need to overcome these situations. I would note one other comparison between the two. Both MGR and JLR develop their own products in the UK. JLR is now the only significant designer of motor vehicles left in the UK. Vauxhall, Mini, Nissan, Toyota, Honda only make cars. Is this what we really want for the future?

  11. Paul says:

    Yoyue comment about other manufacturers ‘only making cars’ is plainly not true. Take Nissan for example – the Qashqai was designed in Paddington (last time I looked that is in LONDON), it was engineered in Cranfield (Last time I looked thats in BEDFORDSHIRE) and its built in Sunderland (last time I looked thats up north in ENGLAND) Get your facts right!!!

  12. Paul says:

    Sorry for mis-spelling – should be “your”. Its monday morning after all!!

  13. Ken Strachan says:

    Woolworth’s are not a good parallel, they were the Hyundai of the High street. Ford may have saved Jaguar, just as Honda saved BL, but they made some mistakes, so JLR are not doing as well as they could have been if better run. Jag in particular are turning the corner now that their styling/image has gotten past 1968. If we can help out the teenage scribblers of the City, we should certainly help out a car maker with a long term future; otherwise when we get past this economic downturn, we will all say, a la Clarkson, “where did all the British cars go?” Nobody cares whether a Ford or a Toyota is made in GB, but for a Jag or a Landie, it does matter. Just to end on a really cynical note, if one or more of the US Big 3 goes belly up, there ought to be a big market for luxury sedans and SUV’s going begging…

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