labels: Tata Group, Automobiles - general, Cars
Tata's JLR to receive nearly 800 million from UK government news
04 April 2009

The  UK government has finally agreed to give JLR nearly 800 million ($1.1 billion) from the government's 2.3 billion bailout package announced in January. (See: Britain unveils 2.3-billion loan for car industry)  after Ratan Tata, chairman of Jaguar Land Rover, last month voiced his disappointment over the UK government's inability to guarantee loans to JLR. (See: Ratan Tata criticises the UK government's failure to assist JLR)

According to media reports, JLR will receive about 280 million ($418 million) as loan from the European Investment Bank underwritten by the government for the making environment-friendly cars while the remaining 500 million ($733 million) will come in the form of a loan guarantee backed by the government.

The government will make the announcement after the board meeting of the European Investment Bank, which will be held on Tuesday.

Like in the US and Europe, the recession in the UK has brought its automobile industry down to its knees as declining sales and mounting losses risk over 100,000 jobs in the UK auto industry, including suppliers.

JLR, along with other UK car manufacturers, had been seeking financial help from the UK government, not because it needed a bailout, but it required liquidity to run its day-to-day operations and the UK banks had stopped lending.

Although the UK government had announced the auto industry bailout package in January, these loans have not been forthcoming till date due to the tardy and lengthy procedures of the European Investment Bank, which had confirmed through its website that JLR had applied for 281million in loans.

Breaking his silence for the first time against the policy of a foreign government, Tata speaking to Sky News and Birmingham Post after launching the Tata Nano, had said on 24 March, that the UK government should understand that JLR was seeking a loan from the government for working capital as UK banks have stopped lending, and not a bailout.

"If the attitude is to see who blinks first, then the damage is going to be quite devastating," Tata said and added, "What we have asked for is not a bailout. What we have asked for is help from the government to facilitate commercial loans, because the banking system has come to a halt."

With the company spending 400 million a year on research and development or around a third of the UK's total annual investment in automotive R&D, in one of the most modern auto research facilities in the UK, Tata said that without government guarantees, the research and development programmes will and will have a knock-on effect in the future.

Responding to criticism in the UK for seeking funds from the UK government instead of dipping into his own group coffers to tide through the crisis, Tata said ''Since acquisition we've either loaned or converted to equity Jaguar Land Rover's $1 billion over and above the acquisition and if the British government's view is that we liquidate the rest of Tata to resurrect JLR, I think that's unrealistic.'' (See: Tatas to inject funds into Jaguar Land Rover)

With the car maker already wielding the axe on nearly 1,400 employees, workers at JLR last month voted for a pay freeze for one year in lieu of avoiding compulsory redundancies in the non-management workforce in the UK over the next two years.

All the workers also opted for the four-day week at the plants, a 40-hour working week for salaried employees with no increase in pay with workers being able to interchange work across the Jaguar Land Rover West Midlands sites. The 2,400 salaried employees will forgo the planned bonus this year.

The cash-strapped JLR, bought out by Tata Motors in 2008 from Ford before the onset of the rapid economic slowdown, received an unexpected boost late last month, when a Chinese trade delegation to Europe signed a life-saving deal worth 600 million to purchase 13,000 vehicles from JLR over a period of three years. (See: China bails out JLR with 600-million order)

Last year, JLR made over 600 million in profit while it employed 75,000 people, spent 2.5 billion with suppliers and its exports were over 4 billion a year for UK.

Last month, the UK government gave JLR 27 million to build a all new mini-4x4 'green' car, the lightest and most fuel-efficient model yet, based on the Land Rover's LRX Concept.

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Tata's JLR to receive nearly 800 million from UK government