Talks to secure funding for luxury car maker Jaguar Land Rover are on the verge of collapse, it has emerged.
According to the Financial Times, the British government’s conditions on a £175 loan were rejected by Jaguar Land Rover’s Indian owners, Tata.
The government wanted to bring in loan conditions such as the right to choose a chairman and veto redundancies.
Details of the negotiations between the Indian conglomerate and government were leaked to the press by Howard Wheedon of BCG Partners, a strategic analyst. He labelled the government’s proposals as tantamount to ‘backdoor nationalisation.’
Jaguar has been requesting more than £500m in government support to tide it through the recession. But Mr Wheeldon said the government told Tata it would guarantee only £175m of £340m in loans to Jaguar approved by the European Investment Bank, and for just six months. In return, the government requested it be paid a 15 per cent premium. . Ministers also want Tata to invest £300 million to 400 million before it will guarantee any loans.
In other news, it has emerged that another of Tata’s companies, steel maker Corus is likely to mothball its Teeside plant, causing concern over the future of nearly 2,000 jobs.
Corus report that this development has become unavoidable because of a failure of a consortium of four international slab buyers to complete their contract. An ‘Offtake Framework Agreement’ signed in 2004 committed the slab buyers to purchase just under 78 per cent of the plant’s production for ten years.
The company has today begun discussions with employees and their representatives about what can be done to mitigate the impact of mothballing the plant on the 1,920 employees at the Teesside Cast Products (TCP) plant in Redcar and what future action may be needed. Any decision to mothball is likely to lead to a ‘very significant number of redundancies’, Corus confirmed in a company statement.
“I am extremely disappointed that the consortium members have seen fit to take this irresponsible action,” said Corus CEO Kirby Adams. “Their unilateral termination of a legally binding 10-year contract could bring to an end a fine heritage of steelmaking at Teesside. We regret the distress their action will cause TCP’s dedicated employees, who have worked steadfastly in the interests of the consortium.”
Corus, part of the Tata Steel Group is a leading supplier of steel to the automotive industry. With 16 per cent of its business in this sector, Corus has been deeply affected by the downturn in global car sales as well as the contraction of other markets such as construction.
Responding to the news, Business Secretary Peter Mandelson said:”It is essential that Corus does everything it can legally, and with the Government’s assistance, to reinstate the Offtake Framework Agreement. It is unacceptable that such a development should threaten jobs on such a scale, with such a potentially devastating impact on the area.
“The Government stands ready to do what it can to support the company. We are not prepared to reconcile ourselves to inevitable closure of this plant.”
