Ministers appeared to pave the way for a bail-out of Jaguar Land Rover as they said Britain’s car industry was of “critical national importance” and the government will do more to support it.
Business minister Ian Pearson, MP for Dudley South, suggested car manufacturers will not be allowed to fail, as he spoke in the House of Commons.
Jaguar Land Rover, which supports 70,000 jobs in the West Midlands and Merseyside, has asked for financial support as it struggles to raise funding.
Business secretary Peter Mandelson and Alistair Darling, the chancellor, are considering whether to offer cash.
It looked increasingly likely that the firm’s request will be granted, as Mr Pearson (Lab Dudley South) pledged the government would do “everything we sensibly can” to help viable carmaking businesses survive.
The impression was reinforced when Mr Darling said the government may not have allowed Birmingham carmaker MG Rover to collapse in today’s circumstances.
MG Rover closed the doors of its Longbridge factory in 2005, with the loss of 5,200 jobs.
Mr Darling said the government had let the firm fail partly because ministers did not believe it was capable of succeeding – but also because the economy was strong at the time, and staff would be able to find work elsewhere.
Mr Pearson refused to confirm the Department for Business and Enterprise was having talks with Jaguar Land Rover.
He told MPs: “I don’t want to speculate on talks that the government may or may not have been having with a range of automotive companies.”
But he added: “I’m determined that we do everything we sensibly can to help viable businesses during what are exceptional times as the moment.”
Backbenchers included Richard Burden (Lab Birmingham Northfield), Peter Luff (Con Mid Worcestershire), the chair of the Commons Business Committee, and Julie Kirkbride (Con Bromsgrove) all stressed the importance of supporting vehicle manufacturing.
Mr Pearson told them: “This is a vastly important sector of the UK economy. And we need to look at what more we can do to support companies that are going through very difficult times at the moment.”
He added: “We recognise as a government that the UK automotive industry is of critical, national importance.”
Asked whether he believed the carmaking sector was “too large to fail”, he said: “There is a case that says we need to do more, and we are actively considering this at the moment.”
In a separate Commons session, the chancellor said ministers were unlikely to let firms fail today in the same way as Rover was allowed to fail in 2005.
Giving evidence to the Commons Treasury Committee, he said: “What we do need to look at is, in the event of someone getting into difficulty, what would be the wider repercussions on the economy?
“When Rover collapsed in 2005, one of the considerations that we took into account then was what effect would it have on the wider economy of the West Midlands.
“And we also had to take into account whether there was a future for Rover as it was then.
“And we came to the view that because the economy at that time was growing quite strongly, because the Rover business model was clearly in difficulties, that it would be better to try and get people relocated.
“Now in the present time when you are dealing with a substantial downturn, we would look at these cases on their merits, ask ourselves what are the implications here, perhaps for the chain supply companies.”