Workers and bosses alike at Jaguar Land Rover’s plants in Castle Bromwich and Solihull will be relieved after the European Investment Bank announced it would lend £340 million to the cash-strapped firm for research and development.
But while the EU loan – and the backing given to it from the Government – is a strong sign that the authorities see a prominent place for JLR in the future, the negotiations over the vital cash the firm needs to get there are still rumbling on.
More than two months after Lord Mandelson announced a package of measures to support the auto industry, there is still no clear consensus on how to keep manufacturers running at a time when the banks’ reluctance to lend means car firms cannot find the funding they would normally rely on.
The Government has said it that is the responsibility of JLR owner Tata to put up funding to keep the company trading. But Tata has already put hundreds of millions of pounds into the firm, and has made dire predictions about what would happen if the Government does not act.
Many other countries have introduced schemes to improve consumer confidence, with the scrappage scheme in Germany the most prominent example.
David Bailey, the director of Birmingham Business School, said that while the short-term loan was still the vital key to keeping JLR operating, the green technology loan was a step in the right direction.
He said: “It isn’t going to help their short term cash problems. But it’s very important to the firm to invest in research and development which is going to be vital to it in the future.
“They are going back to the Government to ask for a loan. It wouldn’t make sense for the Government to turn it down now they have backed this part of the deal.
“Clearly this is a sign of confidence in JLR – the difficulty they have had to suffer is convincing the Government they need the short term cash. One hopes that the Government will eventually do that.”
And the Society of Motor Manufacturers and Traders said the green technology was a vital part of the future of the industry. A spokesman for the SMMT said: “Confirmation of EIB support for vital investments in cleaner technology is extremely good news for the UK motor industry. It will provide welcome reassurance to the companies concerned and signals their determination to be prepared for the low carbon future.”
Alan Durham, the director of the Coventry and Warwickshire Chamber of Commerce, said: “It has taken longer than we would have liked but it is a positive move. We would now hope to see some additional measures in the forthcoming Budget. Hopefully this will allow the company to gear up for the future as demand from customers for greener vehicles increases.”
But while the mood was broadly optimistic in the political and business worlds yesterday there were some voices of caution.
Conservative West Midlands MEP Malcolm Harbour welcomed the EIB announcement, but said it was just the start of the work necessary to support JLR. He said: “JLR is a crucial employer in the region and our local economy would be devastated if it is allowed to fall behind its other European competitors.
“This is not a hand-out. It is an investment that will secure jobs and build cleaner cars for the future. It will also give a much-needed boost to suppliers.
“JLR is being squeezed from both sides. The market and politicians want cleaner cars but manufacturers no longer have the resources to invest in developing them. If we want our hard-pressed manufacturers to continue investing in meeting the laudable demands to cut emissions we will have to put our money where our mouths are.
“JLR has impressive research facilities and this loan will enable the many projects ongoing at the company to continue.”
But he said the Government needed to make sure they were able to use the new funding for green research without having to worry about the day-to-day survival of the company. He said this would mean some kind of consumer-focused credit support scheme.
“They have told the Government normal bank lending conditions aren’t available,” he said.
“The Government did promise that there would be additional funding on the top of the EIB funding, but that hasn’t materialised yet.”
And shadow business minister Mark Prisk added: “This European money was first announced by the Prime Minister in September and then confirmed in January. Whilst we welcome this investment, why is it that support for car firms in Britain is coming months after it was delivered in France, Germany and America?”
David Caro, West Midlands policy unit chairman for the Federation of Small Businesses said, “The FSB welcomes any assistance for Jaguar Land Rover, but we do have concerns about possible delays in delivery and whether it goes far enough to really assist the small businesses further down the supply chain.”
