Press Report : JLR negotiates advance of funding for £175m
John Cranage, Birmingham Post, 8th October, 2009
Jaguar Land Rover secured a further multi-million pound tranche of funding yesterday with the help of its Indian owner, Tata Motors. The luxury carmaker announced it had negotiated an advance of £175 million from the State Bank of India. It brings the inflow of fresh working capital into JLR since global credit markets began to unfreeze to about £500 million.
The announcement coincided with the official closure of the online petition launched by the Birmingham Post six months ago to press the Government to provide JLR with targeted aid to help it survive the recession which cut sales of Jaguar and Land Rover cars by more than half and sent the business into the red. More than 8,000 people signed the petition on the 10 Downing Street website, which ended yesterday after six months.
JLR, which employs about 15,000 in the West Midlands and on Merseyside and spends more than £2 billion in the UK every year, asked the Government for a commercial loan, or loan guarantee, after normal sources of credit dried up during the global banking crisis.
However, with JLR posting a first-quarter pre-tax loss of £62 million and with Tata itself falling into the red, cost-cutting measures are expected to result in the closure of either the Jaguar assembly plant at Castle Bromwich or Land Rover’s Lode Lane complex in Solihull after 2014.
Business minister Lord Mandelson responded by saying responsibility for financing JLR’s activities rested with Tata, which bought the business from Ford in June 2007, even though it had pumped some £1 billion of new capital.
Months of negotiations ensued. These ultimately broke down amid claims that the Government wanted to appoint a representative to the JLR board and to have a say in the company’s business plan. Talks about a Government guarantee for a separate loan of £340 million offered by the European Investment Bank (EIB) to finance a new generation of greener, more fuel-efficient, cars also broke down.
The Government has, however, given the company a £27 million grant to help meet the cost of putting the new Land Rover LRX concept car into production at its Halewood plant on Merseyside and has advanced a further £10 million to help Tata Motors develop electric cars in the West Midlands.
Tata was subsequently able to announce that, thanks to new commercial deals, it no longer needed Government aid to finance its normal activities. However, with JLR posting a first-quarter pre-tax loss of £62 million and with Tata itself falling into the red, cost-cutting measures are expected to result in the closure of either the Jaguar assembly plant at Castle Bromwich or Land Rover’s Lode Lane complex in Solihull after 2014.
We are pleased our funding plans are progressing and appreciate the confidence shown by our banking partners in our business.” Kenneth Gregor, Chief Financial Officer, Jaguar Land Rover
Production would be consolidated at whichever factory remains open without compulsory job losses, although voluntary redundancies could not be ruled out. Other measures include closing the final salary pension scheme to new members and cutting the pay of new staff by 20 per cent.
Offsetting that, up to 800 jobs will be created at Halewood, which will build the new “baby” Range Rover alongside the Land Rover Freelander. Production of the Jaguar X-TYPE saloon will halt at Halewood this year and the model will not be replaced.
The State Bank of India loan announced yesterday comes on top of facilities secured earlier from Standard Chartered Bank, Bank of Baroda and Burdale Financial, a subsidiary of the Bank of Ireland. JLR has also won a $90 million (£56.6 million) export financing facility from ABC International Bank based in Bahrain.
The carmaker’s Chief Financial Officer, Kenneth Gregor, said yesterday: “We are pleased our funding plans are progressing and appreciate the confidence shown by our banking partners in our business.” The company is expected to announce the result of discussions on securing the EIB loan soon.
[Source: Birmingham Post]