US car group Ford is tomorrow expected to unveil plans for a £500m investment to build a new Jaguar car in the UK after being promised an aid package worth about £80m from the British government. Ford directors meet later today in Detroit, where they are due to officially approve the investment, which will create around 1,000 jobs and secure the future of the luxury carmaker in Britain.
The US car giant threatened to produce the new small car – a rival to the BMW 5-series and Mercedes S-class – in America unless it received government money. A powerful lobby at Ford still favours making the car in America, which will be its biggest market, but the company has in effect got what it asked for and few people doubt it will be produced in Britain.
The Department of Trade and Industry is preparing to announce details of the grant tomorrow morning, timed to coincide with a visit by the department’s new Secretary of State, Ian Lang, to Birmingham, where Jaguar has a plant. The aid package has been cleared by the European Commission.
While the news is a big investment in the British motor industry, the decision to give aid is likely to be controversial. General Motors, tipped to begin production of a new small car at its Vauxhall plant at Luton in two or three years, would almost certainly demand a grant as a condition.
Charles Golding, managing director of Vauxhall and a member of the GM board in America, said to the Independent recently: “If Ford got a grant, why shouldn’t we? All we ask is a level playing field.”
And Japanese motor manufacturers, which did not get grants when they set up UK manufacturing sites, may also raise their eyebrows. “How they could get this through the competition regulators is a mystery to me,” said a director of one Japanese company.
However, the DTI will argue that the grants have helped to secure the long-term future of Jaguar in the UK, and will be dependent on Jaguar meeting its promise of creating hundreds of jobs. Jaguar says the project will create 1,000 jobs, though it is estimated that the spin-off work for component suppliers should create another 5,000 jobs.
The grant is by no means the largest regional aid package, though it is unusual for a company already established in the UK to win such a large sum of RSA aid. Last year Samsung received £58m towards building an electronics plant. And in 1975 Ford UK was given £75m.
Ford’s investment in Britain comes at a time when Jaguar sales are soaring, and the luxury carmaker is expected to return to profit this year. The new small car, codenamed X200, will go into full production in 1999 at a rate of about 100,000 vehicles a year. Jaguar currently produces 50,000 cars annually. The car will probably be made at Jaguar’s body plant in Birmingham, rather than the assembly factory in Coventry. Much of the design and development of the new car will be done in the UK.