UK government in dilemma over JLR bailout

23 December 2008

Who will bail out Jaguar? That seems to be the question that is resounding in UK. While reports say that the Tatas are ready to pour in the cash - a reported $1 billion - Tatas themselves have remained refused to comment (See: Tatas to inject funds into Jaguar Land Rover).

The UK government has maintained the stand that it does not have "open its purses" and is not going to follow the US bail-out strategy. However, the UK's business secretary Lord Mandelson has been in talks for injecting funds into the ailing luxury car company, lng cherished as a British icon.

The UK government is understood to have appointed global consulting firm KPMG and investment bank NM Rothschild to provide guidance on the issues facing JLR and the problems of the car industry. The Tatas are understood to have asked for a loan at normal commercial rates.

Since the start of the recession, cars have raced to the top of most people's lists of what not to buy. Even those who would like to get a new one may be unable to borrow the money,  which is how most purchases are financed. As a result, British vehicle production dropped by 33 per cent in November, compared to the previous year, and new passenger car registrations across Europe fell 26 per cent.

Tata Motors had bought JLR for $2.3 billion. Last month, Land Rover saw its monthly UK sales fall by more than 64 per cent. However the Jaguar revenue drop hasn't been so steep, with sales falling marginally to 972 units from 1,096 vehicles in November 2007. 

According to the UK daily The Guardian, reported David Smith, the chief executive of Jaguar Land Rover, sa having said last week, "Along with the whole of the UK motor industry, Jaguar Land Rover is not asking for a bail-out. Together with the Society of Motor Manufacturers and Traders, we have discussed with government short-term loans or loan guarantees because banks have cut back on lending."