The uncertainty surrounding the Government’s willingness to provide Jaguar Land Rover with an emergency loan to help it survive the credit crisis has remained unresolved.
There were conflicting reports on the likelihood of a bail-out being announced before Christmas.
National newspaper claims that business secretary Lord Mandelson was set to approve a £500 million in emergency aid were contradicted by others stating that the Government would step in only as a last resort.
It was also claimed that Jaguar Land Rover (JLR) chief executive David Smith has warned the Department for Business, Enterprise and Regulatory Reform (BERR) that without assistance the Indian-owned company would have no choice but cut “certainly hundreds and probably thousands” more jobs on top of the 600 redundancies it has already announced since the global car industry was overtaken by possibly the worst crisis in its history.
JLR could not be contacted for comment on the claim, made by The Sunday Telegraph.
After weeks of indecision, the US Government has finally announced that it was riding to the rescue of Detroit’s beleagured carmakers with $17.5 billion (£11.5 billion) of emergency loans in exchange for concessions from manufacturers, including heavy wage cuts.
Meanwhile, job losses are stacking up in other sectors of the West Midland automotive industry.
Nearly 300 employees at collapsed components company Wagon were told they were being declared redundant by administrators Zolfo Cooper.
The job losses are at Wagon’s factory at Brownhills in Walsall, which makes panels and door parts for Honda, Ford, General Motors, Land Rover and Nissan. West Midland car importer International Motors has laid off about 19 people at its Coleshill headquarters and parts base in West Bromwich as business dries up.
Managing director Andrew Edmiston said: “There are many views as what 2009 will bring for the UK motor industry. “These range from ‘complete catastrophe’ to ‘not as bad as everyone seems to think’.
“What we can certainly conclude is that it will be unpredictable and in such an environment, companies who can demonstrate real agility will come out on top.
“We have a plan to reduce cost in our business, which is a responsible and appropriate thing to do in an uncertain business climate.”
State help for Jaguar Land Rover would be controversial however because the firm is owned by Indian conglomerate Tata which bought the business from Ford for about £1.15 billion in June.
Opponents of state aid point out that Tata is a wealthy group that should be able to prop up its British luxury car operation on its own without the help of taxpayers.
But some commentators say this may not be the case. They point out that Tata, which is known to have pumped hundreds of millions of pounds of extra working capital in JLR, is itself trying to raise fresh capital from the equities and bonds markets.
Labour peer Professor Lord (Kumar) Bhattacharyya, who has close connections with Tata, was hopeful that JLR would get government aid even though there was no “open cheque book”.
The head of Warwick Manufacturing Group also said he thought JLR and ministers were now “more aligned” and that the Government would announced a package of loans to help the company, and the UK automotive sector generally, “fairly soon”.
“It will especially help the sort of companies, like JLR, which do the research and development that will mean, once the credit squeeze eventually ends, there will be wonderful products and new models available to take advantage of the upturn when it comes,” Lord Bhattacharyya said.
He went on to praise The Birmingham Post for its support for the automotive sector.
“The Birmingham Post was the first to stand up and be counted. That sparked the activism and triggered the campaign which is now yielding results,” Lord Bhattacharyya said.
The Department of Business, Enterprise & Regulatory Reform declined to comment on speculation of a loan.
He said: “Lord Mandelson has said the government does not have an open cheque book to bail out ailing companies. The government is doing all it can to help businesses overcome the current financial and economic challenges.
“Jaguar Land Rover have owners who are well resourced, who have first responsibility for sustaining the companies that they own in existence and in production for the future.
“The Secretary of State has confirmed that government is talking to industry bodies about the current economic difficulties the sector faces.”