Jaguar Land Rover could move a step nearer to securing its long-term future tomorrow when the European Investment Bank is expected to announce it has qualified for a €300 million (£270 million) loan.
The loan – which will have to be guaranteed by the UK Government – will, however, be tied to the West Midland carmaker’s plans to develop a new generation of “green” vehicles.
It will not help meet its need for a boost to its cash flow as it fights to survive the global credit squeeze and the slump in car sales.
For that, JLR still needs some £500 million more in commercially-rated Government loans or loan guarantees in order to continue financing its day-to-day operations.
Government sources said unofficially at the weekend that JLR had met the European Investment Bank’s (EIB) criteria and that its application for a loan would be rubber stamped when the Bank’s directors meet in Luxembourg tomorrow.
But even if that happens, BERR, the Department for Business, Enterprise and Regulatory Reform, will have to put guarantees in place.
JLR said yesterday it would take weeks for the cash to arrive.
“This money is tied specifically to the future development of new technologies and will clearly not be part of our cash flow,” a spokesman said.
“It will help us to meet our longer term obligations to develop lightweight materials and engines with lower carbon emissions and would be very welcome.
“The Government has said that £1.3 billion of the £2.3 billion aid package it has set aside for the automotive industry will be used to guarantee EIB loans. Our discussions with the Government to secure part of the remaining £1 billion of aid are continuing.”
JLR has been asking for Government assistance since the credit squeeze cut off normal flows of liquidity from the banks. The company, which employs about 15,000 people in the West Midlands and on Merseyside, has cut hundreds of jobs and recently persuaded its workforce to accept four-day working and pay freeze in exchange for an undertaking of not compulsory redundancies for two years.
On a more positive note, it also recently won a £27 million Government grant to help meet the estimated £300 million cost of putting the Range Rover-badged LRX concept car into production at its assembly plant at Halewood, Merseyside.
The car will be the smallest, lightest and most fuel-efficient Land Rover has ever made. The economic conditions facing the company will be underlined today when the Society of Motor Manufacturers and Traders reports the industry’s new car sales for March.