Page last updated at 13:40 GMT, Saturday, 20 December 2008

Motor industry bailout 'due soon'

Jaguar emblem
Jaguar Land Rover employs 2,500 UK workers in research

Ministers are discussing a 667m loans package to help Jaguar and the UK motor industry, a Labour peer has claimed.

Prime Minister Gordon Brown had said on Friday there was "no promise of support" for the car maker, despite action to shore up the US motor sector.

But manufacturing expert Lord Bhattacharyya told the Financial Times he expected the government to arrange the loans "fairly soon".

Unions say tens of thousands of jobs are at risk without government help.

Lord Bhattacharyya, who is said to be close to both Mr Brown and Ratan Tata, chairman of Jaguar Land Rover's owner the Tata group, said Britain should follow America's lead.

President George W Bush agreed to lend $17.4bn over three months to keep General Motors and Chrysler afloat, saying that allowing the firms to fail would not be "a responsible course of action".

It is simply no good bailing out the banks if the banks won't then bail out business
Derek Simpson
Unite

And Lord Bhattacharyya said: "If the government fails to act to help the car industry, the UK will be the only major country not to safeguard its vehicle sector."

However, he said he understood the government was already discussing the loan package, along with an unspecified amount of support for other car companies.

The peer is head of Warwick Manufacturing Group research organisation.

He said Jaguar Land Rover was a "special case" in that it conducted almost all its research in Britain - employing 2,500 of its 15,000 UK workforce in that field.

Confederation of British Industry director-general Richard Lambert said taxpayers could afford to provide short-term loans for ailing firms, given that 800,000 UK jobs are reliant on car-making.

Mr Lambert said: "The whole industry needs access to credit and I think this is something the government could do and should do with urgency.

"This is not money that's being given away, it's money that will be repaid."

Instant liquidity

Meanwhile, joint leader of the Unite union Derek Simpson said the industry needed financial aid "within days".

"It is simply no good bailing out the banks if the banks won't then bail out business," he said.

"By providing short-term loans, repayable with interest, the Treasury could instantly restore some liquidity to this system and save the tens of thousands of skilled jobs that are at this moment hanging by a thread."

Mr Simpson described the UK motor industry as world-class, having undergone a massive modernisation process in recent times, but said it had been hit hard by the global credit crunch.

Unite has been pressing for a 13bn strategic support package from the government, similar to support provided by the German, French and Swedish governments.

Business Secretary Lord Mandelson has warned that the government does not have an "open chequebook" to help struggling companies.

Lorely Burt, MP for Solihull in the West Midlands and the Liberal Democrat spokeswoman for business, enterprise and regulatory reform, said the UK should follow the lead of the US and Europe.

"All told there are 840,000 jobs involved with the car industry in the UK... if we don't get the help in this country, we could lose our manufacturing industry forever."

Figures from the Society of Motor Manufacturers and Traders this week showed production slumped by a third last month.

The number of cars built in factories in the UK was 97,604, down by 33% on November last year, while commercial vehicle production fell by 50%.

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