On the heels of media report that Tata Motors Ltd has agreed to inject "tens of millions" of pounds into Jaguar Land Rover to prevent an immediate cash flow crisis, the British Govt has decided to intervene to prevent JLR from collapsing, a newspaper reported on Monday.
Prime Minister Gordon Brown has decided to intervene to prevent JLR from collapsing and was preparing to announce a short-term bailout package on Monday or Tuesday, the Times reported. Several bills due on Monday could go unpaid without such support, Tata claims.
Other reports said Tata was expected to raise private financing before being given British taxpayers’ support.
“A state package worth hundreds of millions of pounds will be negotiated in the new year to save a firm claimed by its Indian owner to be of key strategic importance to Britain’s economy,” the Times reported.
The newspaper quoted unnamed senior Whitehall figures as saying despite weeks of uncertainty over Tata’s request for a cash injection, Brown and Finance Minister Alistair Darling had already privately agreed that short-term assistance was almost certainly necessary.
“Tata found the cash because its banks were convinced that the government would prevent a collapse, a source said. Officials had been working on the details of the package over the weekend,” the paper said.
Business Minister Peter Mandelson had challenged Tata’s plea at the weekend saying: “The government cannot be a first call for help in these circumstances. The owners have to look to themselves and their own resources.”
The newspaper said Tata had told Mandelson it was facing cashflow problems caused by the plunging price of steel and worsened by last month’s terrorist attacks in Mumbai.
It quoted a source close to the talks as saying: “We’re not yet in a position to know the true situation with Tata, but the feeling is that it’s not worth the risk to confidence to do nothing in the short term.”
A long-term deal will depend on the returns to taxpayers for an exposure that could run into several hundred million pounds, the source added. Negotiations are expected to take between four and six weeks.
Earlier, the Financial Times has reported that the Tata Motors Ltd has agreed to inject "tens of millions" of pounds into Jaguar Land Rover to prevent an immediate cash flow crisis.
The move by Tata, which bought the luxury carmaker earlier this year for $2.3 billion from Ford Motor, comes on top of a "hundreds of millions" of working capital it has provided to the British firm, the paper said citing sources close to Tata.
Last week British business minister Peter Mandelson confirmed that he had held talks with Jaguar Land Rover, which he said was under "particular strain".
He said the government, which has added billions of pounds to the national debt by nationalising or taking stakes in several banks, did not have an open cheque book.
British Prime Minister Gordon Brown said on Friday the government wants to help the car industry through the economic downturn but the main responsibility lies with the carmakers'