In the present economic climate a loan at 15% is a back-door attempt
to get control of the company without giving real help. 15% is a
punitive rate of interest. This stealth 'nationalisation' is made
clear by the fact the government also demands control over top
management appointments and a veto over all decisions taken by the
company.
Its demands are unbelievably insulting. Unless they modify them
14,000 workers mightlose their jobs and a major company might close
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SKY NEWS at 9.47pm 6.5.09n UK
Tata 'To Reject' Jaguar Land Rover Deal
Jaguar Land Rover's parent company Tata Motors will reject a
Government loan guarantee needed to save the troubled British
carmaker, Sky sources say.
business department last week.
But the Government wanted a 15% commission on the loan, a source
close to the deal said, adding: "What the Government was offering was
not just a snub - it was a total insult."
A source at Tata Motors told Sky News the company will reject the
government deal over the onerous terms.
The total rescue package involves loans of almost £800m, of which
£340m is to come from the European Investment Bank and £450m from
British banks underwritten by the Government.
In addition to the 15% rate, the Government is understood to want a
veto power on the company's board, its own chairman and a say in
future redundancies.
But a government source dismissed suggestions the talks are close to
collapse and said they want the firm to "succeed", especially due to
its strong environmental policies.
The source added that rumours over a rejection of the deal amount to
"tactical positioning by the Tata group" and the negotiations are
ongoing.
Howard Wheeldon, a senior strategist at the brokerage BGC Partners,
told Sky's Jeff Randall the Government deal was "totally unacceptable".
Speaking on Jeff Randall Live, he said: "The government has said it's
only prepared to guarantee £175m of these loans and worse it wants to
take 15% off as a charge, immediately payable by Tata to the Government.
"Esssentially the British Government is putting nothing into this so
what's the charge for?
"The Government also wants to take a much more leading control in the
future of Jaguar Land Rover such as the appointment of a chairman,
day-to-day decisions, investment decisions.
"It wants a permanant seat on the board. That is my understanding.
Again this would be acceptable if it was putting up a lot its own
money, but it isn't."
Sky's business correspondent Paul Harrison said: "The conditions the
government was going to place on Jaguar Land Rover through their
parent company Tata were just a little bit too exacting.
"The worst case scenario could be - we're talking about 14,000 jobs
potentially at risk and even plant closures."
But a spokesman from Jaguar Land Rover said: "We always said
discussions would be complex.
"The process of negotiation is under way and we are making progress.
"We expect to stand by our agreement with the unions that there will
be no compulsory redundancies for two years.
"All of our three plants are currently working on a four day week."
Jaguar Land Rover has plants in Castle Bromwich and Solihull in the
West Midlands as well as Halewood on Merseyside
============================
TELEGRAPH 7.5.09
Jaguar talks close to collapse
The future of Jaguar Land Rover, the largest UK-based car maker, is
under threat as talks with the Government about a financial support
package were on the brink of collapse last night.
By Graham Ruddick
JLR, which is owned by Indian conglomerate Tata, needs guarantees on
a £340m loan from the European Investment Bank and a £400m financial
package from state-backed banks Royal Bank of Scotland and Lloyds
Banking Group.
However, according to sources close to the negotiations, JLR and Tata
were left reeling on Friday by what they believe are unacceptable
final terms set by the Government for underwriting the EIB loan.
These include the Government demanding a veto over all decisions
taken by the company, the ability to choose the chairman, a permanent
seat on the board, extra investment into JLR of £300m by Tata, and
guarantees of no further job cuts among the 15,000 UK employees.
The Government has also said it will only guarantee £175m of the loan
and that, if it is taken up, it will charge JLR 15pc of the total to
provide it.
The loan from the EIB is intended for the development of green
technology - such as hybrid vehicles, lightweight materials and
regenerative braking systems - but needs to be fully underwritten to
be received by JLR.
Earlier this year, Lord Mandelson, the Business Secretary, unveiled
the £2.3bn Automotive Assistance Scheme, which was designed to help
car makers through the crash in new vehicle sales by offering loan
guarantees.
If JLR is unable to access the EIB loan then it would face serious
questions about its ability to finance a £800m future development
programme, with plants and jobs threatened.
Howard Wheeldon, senior strategist at BGC Partners, suggested the
Government was trying to take control of JLR "without putting a
single penny up front" as he provided a run down of the key demands.
He added: "This latest Government failure to support the future of
the UK economy is an absolute disgrace - tantamount to throwing the
best of the highly valuable British luxury car industry and export
potential into a den of wolves."
A spokesman for the Department for Business said the primary
responsibility for JLR lies with Tata. "Any Government financial
assistance must protect taxpayers' money. But on this basis we are
prepared to help although not on any terms," they added. "We regard
JLR as a viable company with good long-term prospects."
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