Tom Scotney, Birmingham Post, 17th August, 2009
Sources close to Jaguar Land Rover owner Tata Motors say the Indian company is furious at the actions of the Government, after financing talks between the two fell through – with Tata putting the blame squarely at the door of Business Secretary Lord Mandelson.
The bitter fallout comes in the aftermath of the Government’s attempts to place the blame on Tata for the failure of nearly a year of talks. This is a change of face from last week, when the company said it had dropped the loan negotiations with the Government because private sector terms had become more acceptable. It is now being claimed by insiders that the firm lost patience with the state of negotiations.
Tata has now arranged a private banking deal to underwrite £175 million of working capital, as well as a £340 m loan from the European Investment Bank in order to develop a new generation of low-emission cars. The Government had originally said it would guarantee the EIB loan, but this was never completed.
Lord Mandelson has taken a hard line with automotive companies asking for financial support from the Government. It was always maintained that JLR would not receive a state handout, and the £2.3bn Automotive Assistance Programme, which was set up at the start of the year, has been criticised for not acting quickly enough.
The Tata insider told the Birmingham Post: ‘There were still big discussions taking place over exactly what the Government wanted in terms of influencing the business agenda. The Government had dropped some of the more severe conditions such as being able to appoint JLR’s Chairman, appoint another member of the Executive Committee, and having a veto in relation to investment and jobs but unresolved matters still existed. The gap between the parties had narrowed but had not closed.”
Tata decided that if the banks were now prepared to give guarantees, then what was the point of dealing with the Government? They might as well just go direct.” They “could not believe how they had been treated by Lord Mandelson, it was a no-brainer to go private.” A Tata insider
The source said the Government had also been demanding that any guarantees should be subject to counter-guarantees from major Indian banks such as the State Bank of India, the country’s largest. ‘Tata decided that if the banks were now prepared to give guarantees, then what was the point of dealing with the Government? They might as well just go direct.”
It had, after all, been the freezing of credit in the international financial markets which had forced Tata to ask for British government help in the first place. So, given that they ‘could not believe how they had been treated by Lord Mandelson, it was a no-brainer to go private”, said the source.
Tata remains furious at the Government’s leaking of data over the talks, as it had been agreed by both parties that the negotiations should remain private. However, the Birmingham Post’s sister paper, the Coventry Telegraph, was given a copy of a document in which Lord Mandelson urged Tata to ‘get a move on’ with the talks even though all along it had supposedly been the Government doing the prevaricating; then, when Tata decided on its own deal with the banks and informed Ministers accordingly, this further letter was leaked ‘within hours of arriving in London”.
This was followed by attempts to claim that Tata had been asking the taxpayer for millions of pounds when the company’s agenda had always been about loan guarantees, not state aid. Tata watchers say it left such a ‘bad taste in the mouth” it was no wonder the company decided it no longer had any confidence in the discussions.
[Source: Birmingham Post]
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