Martin Arnold, FT.com, 16th November, 2009
Jaguar Land Rover will today announce that it has secured a new £170m working capital facility from GE Capital, allowing it to start making money from its finished vehicles long before they reach dealers’ showrooms around the world. The five-year loan is an important step for the lossmaking car company owned by India’s Tata Motors, as it seeks to shore up a financial position weakened by the credit crisis and falling sales of its luxury vehicles.
The asset-backed distribution finance facility from GE Capital – the financing arm of General Electric in the US – will be drawn down by JLR as soon as vehicles roll off its three UK production lines. It will boost working capital within the company by shortening the 30-to-40-day gap it typically has to wait between producing hundreds of thousands of cars a year and delivering them to dealerships in 90 countries.
‘Having identified a large group of assets that had been underutilised we looked at how working capital can be freed up from them and we found a solution,” said Rich Green, Chief Executive Officer of GE Capital’s distribution finance business. ‘We are talking to several other European carmakers about a similar facility, but as far as we know this is the first of its kind.”
Having identified a large group of assets that had been underutilised we looked at how working capital can be freed up from them and we found a solution. We are talking to several other European carmakers about a similar facility, but as far as we know this is the first of its kind.” Rich Green, Chief Executive Officer of GE Capital’s distribution finance business.
Tata had been seeking government loan guarantees for a £340m European Investment Bank loan to fund its investments in emissions-cutting technology, and for up to £500m of commercial bank loans. The group balked at the conditions Britain was attaching to any financing, including having a say in its management and business strategy.
Tata has pumped more than £1.2bn into JLR to cover losses since buying the businesses from Ford Motor for $2.3bn last year. The businesses have slashed spending, cut production by more than 100,000, reduced headcount by 2,500, frozen pay and suspended bonuses since the beginning of the downturn.
JLR said last month that it had raised £500m of new funding facilities from Standard Chartered Bank, Bank of Baroda and Burdale Financial Ltd, a subsidiary of the Bank of Ireland. However, the company also said it would wind down one of its two plants in the Midlands by the middle of the next decade as part of a restructuring plan that would see it build more vehicles in fewer places.
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