Page last updated at 14:39 GMT, Thursday, 18 December 2008

Government confirms Jaguar talks

Lord Mandelson: We do not have open cheque book

The government has held talks with Jaguar Land Rover over the possibility of state aid for the carmaker, Business Secretary Lord Mandelson has confirmed.

He said no decision had yet been made, and there was not "an open chequebook".

Jaguar Land Rover was bought by India's Tata in June for 1.7bn ($2.6bn). Since then output has been trimmed at its three main UK manufacturing sites.

News of the talks with the UK government came after Tata said it was to sponsor Ferrari's Grand Prix team.

Tata, which bought Jaguar Land Rover from Ford, said it was not commenting on talks with the government.

Neither Tata or Ferrari have revealed the cost of their sponsorship deal.

Jaguar Land Rover chief executive David Smith said he agreed with the opinion of trade body Society of Motor Manufacturers and Traders that the industry's "situation in the UK is a national emergency requiring urgent action".

'Analysing carefully'

Jaguar Land Rover, which employs about 15,000 in the UK, said last month that it faces "unprecedented trading conditions" as global sales for the whole of the car industry have fallen sharply since the summer.

The car sector - car manufacturing - is a centre of real excellence and competitive strength in our country
Lord Mandelson

It also announced last month that it was cutting 850 agency jobs.

"We are analysing very carefully what is going on in the [car] sector, and we will make good judgments in good time if it is appropriate for the government to take any action or if it is possible for us to do so," said Lord Mandelson.

"I have had discussions with the owners and management of Jaguar Land Rover in particular, because they argue that they are under particular strain."

Yet Mr Mandelson added that "people should not assume that we are as a government in the business of bailing out any company that has a problem during this coming very tough period".

He said he would not be "bounced" into any decision, and that the owner of Jaguar Land Rover - Tata - had first and primary responsibility for the carmaker's financial requirements.

'Iconic brands'

Shadow Business Secretary Alan Duncan said the government needs to be ready to step in and help sectors survive the slump.

"What companies such as Jaguar Land Rover and Nissan need is credit help, not unconditional bailouts, to prevent those companies which are viable in the long-term going to the wall in the short-term," he said.

"This means government guarantees to underwrite loans made by banks on commercial terms to businesses."

Ford bought Jaguar in 1989 for 1.6bn, and Land Rover in 2000 for 1.8bn. The combined cost of 3.4bn was double what it sold them for.

Tata chairman Ratan Tata said in June that Jaguar and Land Rover were "two iconic British brands with worldwide growth prospects".

However, that was before the crisis in the global financial sector and subsequent sharp global economic slowdown.

Tata has also since reported falling sales at its main car business in India.

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