Page last updated at 19:29 GMT, Tuesday, 5 May 2009 20:29 UK

Government lends 5m for LDV deal

LDV vans lined up at the firm's plant in Birmingham
Production stopped at LDV in December

The UK government is lending £5m to Malaysian firm Weststar, which has agreed to take over struggling UK van maker LDV.

The deal will stave off administration on Wednesday, but the loan would have to be repaid after four weeks, says BBC chief economics correspondent Hugh Pym.

The last-ditch deal will secure, for now, hundreds of jobs.

The Birmingham-based business and plant has been at a near standstill since before Christmas.

Weststar is yet to formally accept the deal.

'Credible chance'

About 800 people are employed at LDV's Birmingham factory and about 1,200 people employed in dealerships.

"Weststar's proposed purchase of LDV offers the only credible chance of keeping this manufacturing plant in the UK," said business minister Ian Pearson.

"Whilst completion of the deal is not certain, it would have been irresponsible of the government not to support it going forward.

"But this is a one-off bridging loan and it cannot be extended."

It is understood LDV and Weststar had reached a deal earlier in the week, but that it relied on the short-term UK government financing.

LDV had been looking for funding, or a rescue deal, before Wednesday, 6 May, when it was due to formally go into administration.

'Long way to go'

Following the news of the government loan, Tony Woodley, joint general secretary of trade union Unite, said: "We are delighted at the government's backing for this company."

He added: "There's a long way to go yet but now thoughts can turn to building a serious and successful future for this company, and to getting these men and women, who have not built a vehicle in months, back to work."

In February, LDV asked the government for a bridging loan because it was "literally running out of cash".

At the time the government said the taxpayer could not be expected to pay for the company's losses, but that talks with LDV were "ongoing and regular".

LDV - which was put up for sale by its Russian owner Gaz late last year - has a long-term association with Weststar making LDV commercial vehicles in Malaysia.



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