Jaguar Land Rover aid is becoming more uncertain

Article by Christian Andrei, on August 26, 2010

There are reports emerging that because of the bickering between the Treasury and Lord Mandelson's business department, the GBP800 million aid for Jaguar Land Rover is becoming more uncertain as delays are created, putting jobs at Jaguar Land Rover on the line.

There are intimations in the reports saying that Jaguar Land Rover received a warning in a meeting with Mandelson's department that the conditions required by the Treasury in return for its support of the GBP800 million aid may be so rigorous that it would not concede to them.

Mandelson's department denied that there was any existing rift between them and the Treasury though. The spokesman for the firm said that officers from both the Treasury and BERR are in accord that the parent company is responsible for short-term financing or longer-term restructuring. Both parties are still in discussion concerning the long-term business intentions of Jaguar Land Rover.

A GBP2.3 billion support package has been put in place for the car industry by Mandelson, of which GBP1.3 billion was allocated to ensure loans made by the European Investment Bank (EIB). EIB has consented to lend GBP430 million to Jaguar according to the government, but top execs are annoyed that the government has not yet committed to underwrite the loan. 

The GBP340 million is a piece of the GBP800m refinancing package for Jaguar, consisting of loans from banks led by government-controlled Lloyds Banking Group and Royal Bank of Scotland. Tata, the owner of Jaguar Land Rover, is said to have consented to offer GBP100 million.

In principle, the Treasury has already consented to ensure only about three-fourths of the EIB loan. Jaguar has given the nod to underwrite the balance. Three weeks have gone but the Treasury gas not yet indicated what conditions it will provide for underwriting the loan.

There is a deep concern within Jaguar that the Treasury may be asking that the government is given an equity stake in the company or that Tata bring in another GBP300 million into it UK auxiliary company. To date, Tata has already pumped GBP800 million in the ailing company after purchasing it from Ford for GBP1 billion. [via guardian]

Topics: jaguar, land rover

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