India’s Tata Motors has agreed to inject “tens of millions” of pounds into Jaguar Land Rover to prevent an immediate cash flow crisis, the Financial Times reported on Monday.
The move by Tata, which bought the luxury carmaker earlier this year for $2.3 billion from Ford, comes on top of a “hundreds of millions” of working capital it has provided to the British firm, the paper said citing sources close to Tata.
Car makers around the globe have been hit by a collapse in demand as the economic slowdown spreads and access to credit is choked off by the financial crisis. The Times reported on Monday that the prospect of government assistance worth “tens of millions” of pounds to help keep Jaguar Land Rover afloat had helped the company’s owners to secure last-minute funding from the banks.
It quoted senior figures in the civil service as saying that Prime Minister Gordon Brown, Chancellor Alastair Darling and Business Secretary Peter Mandelson had agreed that assistance for Jaguar would be necessary to prevent its collapse. A spokesman for the Department for Business, Enterprise and Regulatory Reform told Reuters: “The government stands ready to help companies in the current difficult economic circumstances but does not have an open cheque book. The government has been in regular contact with Tata over Jaguar.”
Last week Mandelson confirmed that he had held talks with Jaguar Land Rover, which he said was under “particular strain.” He said the government, which has added billions of pounds to the national debt by nationalizing or taking stakes in several banks, did not have an open cheque book. Brown said on Friday the government wanted to help the car industry through the economic downturn but the main responsibility lies with the carmakers’ owners. Trades unions have called on the government to step in to save an industry employing tens of thousands directly and indirectly through suppliers.
The United States last week announced a $17.4 billion loan package to rescue its stricken auto makers. The Canadian government put up an additional $3.3 billion in emergency loans a day later. (Reuters)