The British government has said that it is in discussions with the Tata Group-owned luxury carmaker Jaguar Land Rover (JLR) on guaranteeing loans.
While making it clear that the primary financial responsibility of the cash-strapped JLR rests with Tata Motors, the British government continues to hold confidential discussions with the company over both short- and long-term financing and business plans, an official at the department of business, enterprise and regulatory reform (BEER) said.
Hit by financial crunch amid the global slowdown, Tata Motors had sought assistance from the British government to put the ailing JLR back on track. Tata Motors acquired JLR for £1.15 billion ($2.3 billion) in April last year from US auto major Ford. JLR, which employs around 15,000 workers, axed 450 jobs in January due to falling demand. “The (British) government wants to see JLR safely through difficult trading times and provide stability for the company and its employees. We regard JLR as a visible company with good long-term prospects. That’s why the government is having confidential discussions with JLR and its parent company over both short and long-term financing and business plans. These negotiations are continuing,” the BEER spokesperson said.
The British government, which has appointed financial advisors to assist Tata Motors, is prepared to guarantee loans from the European Investment Bank (EIB) on the right terms, the official said. The EIB has already given its approval to a £340 million loan several weeks ago, but cannot dispense the cash until the British government agrees to repay it if JLR goes bankrupt.
Any government financial assistance must, of course, protect taxpayers’ money, BEER said, adding the government was prepared to help, although not on any terms.
There were reports in the British media that financial support for JLR from the EIB was in jeopardy as Tata Motors declined to accept the tough conditions imposed by the British government in return for guaranteeing the loan, including the right to veto management decisions.
When contacted, the Tata Motors spokesperson confirmed that discussions with the British government were on. He, however, said the content and progress of the discussions were confidential. Earlier in an interview, Tata Group chairman Ratan Tata had said that he only wanted the British government to facilitate access to credit and not a bailout for JLR. “I would like to see the British government playing only one role. It controls the banks, and all I seek is the facilitation to provide access to credit on commercial terms. It’s not a bailout,” he had said.
BEER further said that the government’s role was not about picking winners or ignoring market signals, but removing barriers which hold business back. “It is about identifying markets that offer significant opportunity for high value-added employment or growth in Britain and where the government can have a positive impact in unlocking the competitive potential of firms and workers in these markets.”
Britain pledged in January to guarantee up to £2.3 billion of loans, including £1.3 billion from the EIB, to help its ailing car industry cope with a slump in demand.
Source: Economic Times