The British government is considering a bailout for the luxury car maker Jaguar Land Rover and is in talks with the Tata Group, for a rescue package.

Jaguar Land Rover was "under particular strain" from the economic downturn, business secretary Lord Mandelson said last night after talks with the car manufacturer.

''We are analysing very carefully what is going on in the sector and we will make good judgements in good time if it is appropriate for the government to take any action or if it is possible for us to do so,'' Mandelson told Sky News.

''We are looking at the sector as a whole. I have had discussions with the owners and management of Jaguar Land Rover in particular, because they argue that they are under particular strain,'' he said.

The company had last month sought a £1 billion loan, after steep declines in production and sales forced it to lay off around 850 IT and engineering staff because of "severe" global car market conditions.

Jaguar Land Rover currently employs 15,000 people and has been operating on a four-day week since August.

Last week another car maker, Aston Martin, also announced possible job cuts of up to 600 inviting calls for strike action by the industrial workers' union Unite.

Aston Martin, which was sold by Ford to a consortium last year, has a workforce of 1,850.

The two car makers have also extended the Christmas break by two weeks for staff at various plants around the Midlands.

Component manufacturers in and around Midlands are also under threat and nearly 70 car component firms in the West Midlands held a meeting at a suppliers forum in Birmingham to decide on the course of action.

Both car makers and component manufacturers are clear on their moves to scale down production and have called upon the government to support their moves to avoid redundancies.

There was also a unanimous call to the government to make credit available so they could retain staff during low production periods.

At least one major parts maker, Wagon, based in Birmingham, was wound up last week, costing around 500 jobs.

Mandeleson, however, said the government does not have ''an open cheque book'' for ailing companies and would be too early to say whether state aid would be forthcoming.

It is likely that the government may consider granting substantial loan guarantees to JLR. The guarantee would allow the company to raise bridging finance from commercial banks.

The British automobile industry, with an annual turnover of about 50 billion pounds, provides direct employment to some 190,000 people and supports 850,000 jobs in the industry as a whole, including components and retail segments.

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