Months of talks over a crucial loan guarantee by the Government to loss-making Jaguar Land Rover have been stretched to breaking point - 24 hours after a deal appeared within reach.
A letter leaked by the Government to the Birmingham Post’s sister newspaper the Coventry Telegraph has left the discussions “in limbo,” with JLR owners Tata reportedly furious at Lord Mandelson’s Business Department.
The leaking of the letter has caused a near total breakdown in trust between the two parties at a point when they were closer to an agreement than at any stage in the three months plus of detailed negotiations.
Tata bosses have been infuriated by the publication of the letter in which Lord Mandelson calls on the Indian group for “face to face negotiations” to end delays in the long-running talks.
The letter, dated July 16, says: “As we discussed, I am concerned at the lack of pace on the Tata side in considering the negotiations on possible UK Government support to Jaguar Land Rover.
“In order to move along these important discussions, I would ask you to urge your colleagues at Tata Motors to respond to our revised team sheet that was sent to Ravi Kant on 7 July as soon as possible.
“It would be helpful if a representative from the company, with appropriate authority, is available in the UK from early next week to conduct face the face negotiations so we can reach a conclusion as soon as possible.”
The leaked letter came just days after Lord Mandelson went on Sky TV calling on Tata to “quicken the pace” of talks over a guarantee to the £340 million European Investment Bank loan first unveiled in early April.
But a source close to the negotiations said: “Quite simply, the Government appears to be on a different planet. Relations are frosty - the talks have been disrupted by the Government’s decision to leak details of what has been going on because it has undermined trust.
“It was bad enough Mandelson going on TV after doing nothing for 10 months and saying Tata had to hurry up but to then see private correspondence leaked - how can you trust these people?
“The Government are at risk of destroying these whole discussions. This has shaken Tata’s confidence. The Government has asked Tata not to negotiate in public and they stood by that but Mandelson has not.
“Only one party in these discussions has been dragging its feet and that is the Government.”
The Government has already indicated that they are only willing to pledge guarantees of £175 million of the £340 million on offer from the EIB, and JLR may now have to seek other avenues of finance to help stem losses.
Meanwhile, further production cutbacks are likely following Tata Motors vice-chairman Ravi Kant’s warning last month that “plant shutdowns” could not be ruled out. JLR has already lost £281 million in the first 10 months under Tata.