The weekend’s news that Jaguar Land Rover seems to be edging closer to receiving the financial help it needs to weather the recession is welcome indeed.
The £270 million package from the European Investment Bank is an important component of the assistance required by the luxury car maker to keep its head above water over the next few months – assuming, that is, that the UK government provides the guarantees the bank needs.
But it is only that: a component part.
The EIB money is – rightly – linked to JLR’s drive to develop greener technologies for the future generation of cars upon which its long term future depends.
But its working capital requirements of around £500 million are still hanging in the air, where they’ve been since the banks called a sudden halt to the provision of normal financing arrangements when the credit crunch bit hard last autumn.
The EIB’s £270 million is worthless until JLR’s working capital levels return to normality. All the ambitions to develop a new, greener JLR for the future will come to nought unless the firm’s present needs are met.
Tomorrow’s EIB meeting – where the deal will be ratified if the UK government acts as guarantor to JLR – is the perfect chance for business secretary Lord Mandelson and Chancellor Alastair Darling to prove they believe in the UK automotive industry.
They have spent far too long concentrating on the financial sector and hiding behind European bureaucracy, while the company and other manufacturers wait in vain for some concrete statement of intent from the Government.
Support for the EIB loan is the government’s chance to put this right and send a signal to JLR, its suppliers and its thousands of workers that the waiting may be nearly over.
The industry has spent a frustrating six months in great uncertainty, unable to look more than a few weeks into the future while global rivals bask in their own government aid.
The UK government must support the EIB initiative, but it must also immediately give JLR the loan guarantees it needs to get working capital back into the business. Failure to back the EIB plan will be a betrayal of Jaguar Land Rover.
Failure to follow through with a package to ease the working capital situation will be a deliberate betrayal of the whole of the West Midlands.