Jonathan Guthrie in Birmingham, Financial Times, 27th February, 2009
LDV, the troubled Birmingham vanmaker that is seeking government aid, said on Friday that an unnamed bidder had proposed to buy its assets and shift production to a low-cost centre abroad.
Such a sell-off by GAZ, LDV’s Russian owner, would see thousands of job losses in the West Midlands and revive painful memories in Birmingham of MG Rover, whose main production lines were bought out of administration and shipped to China.
Earlier this week the government turned down a request from an LDV buy-out team, led by Erik Eberhardson, outgoing GAZ Chairman, for a £20m-£30m bridging loan. The request stirred controversy because Oleg Deripaska, GAZ owner, is a friend of Lord Mandelson, the Business Secretary, whom he entertained last summer on his luxury yacht.
Officials at the loss-making factory in Birmingham, which employs 850 people and supports thousands more jobs at dealers and suppliers, said the buy-out team had “no desire” to see production go overseas. However, the asset-stripping bid, of which neither GAZ nor LDV provided details, could make financial sense for a foreign manufacturer seeking to avoid the £500m expense of designing its own van range and equipping a factory.
The offer for LDV’s assets has lent urgency to discussions between the buy-out team, GAZ, LDV’s bankers and suppliers. It is understood that suppliers, who are owed tens of millions of pounds, are now edging towards an agreement to supply further components to LDV following a buy-out. The vendor and its financial backers may also concede more generous terms. If so, the buy-out team is likely to go back to the government with a substantially reduced request for bridging finance next week, to be repaid in a few months from a European Investment Bank loan.
The company ceased production in December and saw a 42 per cent decline in registrations last year. If it can survive for a few more weeks and shrink its request for aid it would vindicate the government’s stance in pushing troubled manufacturers to exhaust all external financing options before seeking state support. Lord Mandelson, who has avoided involvement in LDV’s loan request, has pursued a similar line with Jaguar Land Rover, which has sought support estimated at more than £500m.
Earlier this week GAZ suggested LDV would close in “days rather than weeks”. Birmingham City Council on Friday stationed a bus manned by benefits counsellors opposite the factory to offer workers redundancy advice.
Jerry Blackett, Chief Executive of the Birmingham Chamber of Commerce, said: “It is alarming how quickly foreign competitors can cherry pick production assets and set up new businesses with them. But that is what we saw with MG Rover.”
After the Birmingham carmaker collapsed in 2005, its assets were bought out of receivership by Nanjing Automotive, the Chinese industrial group. The bulk of production machinery was shipped to China.
[Source: Financial Times/FT.com]
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