Mandelson hands out �2.3bn to car makers

The UK government has unveiled a long-awaited £2.3bn package of support to help stem mounting job losses in the car industry, providing loan guarantees to firms hit by a huge slump in sales.

Business Secretary Lord Mandelson stressed that the measures were not a bail-out, believing they would give manufacturers a big boost.

But the joint leader of the biggest union said the announcement was a "massive disappointment", while one motor firm only gave the package "six out of ten".

Lord Mandelson will meet motor industry leaders and unions tomorrow to discuss the announcement in detail, with some union officials warning of a jobs "catastrophe" if the measures do not have an immediate impact on car sales.

The government is to offer loans of up to £1.3bn from the European Investment Bank as well as guarantees of support of up to a further £1bn for lending and loans where appropriate.

Bids will be assessed on a case by case basis but the government made it clear it was not offering a subsidy or blank cheque to car firms which have been pressing for action for months.

Unite has been calling for aid worth up to £13bn for manufacturing, including car companies.

Lord Mandelson also announced increased funding for training of car workers as well as moves to "reinvent" the industry for a greener, low-carbon future.

"This industry is not a lame duck and I am not proposing a bail-out. It has been transformed over the past decade. Productivity has risen, catching up and overtaking both France and Sweden," he said.

"In Britain, we have some of the world's most productive car plants. For the future, Britain needs an economy with less financial engineering and more real engineering. The car industry can and should be a vibrant part of that future," the minister said.

The government said it had already taken a series of actions to unblock lending by banks to smaller companies, but today's package applied to projects over £5m from UK-based vehicle manufacturers and parts suppliers with an annual turnover of £25m or more.

Unite joint leader Tony Woodley said: "Two billion pounds sounds like a lot of money but at least half of this will be taken up by Vauxhall and Jaguar Land Rover alone, leaving little or nothing for the hundreds of component companies.

"This is a fraction of the support being given by almost every other government in Europe."

Woodley said the government should double the money it had announced today, warning that the spectre of redundancy was hovering over thousands of skilled workers.

Paul Everitt, chief executive of the Society of Motor Manufacturers and Traders, said he looked forward to discussing the substance of the announcement with Lord Mandelson.

Jobs have already been axed in the industry and a number of plants are on extended shutdowns because of the drop in sales.

Leading car firms including Honda, Nissan and Jaguar Land Rover are among those which have been hit.

Business groups generally welcomed the announcement, but Richard Lambert, CBI director-general, cautioned: "It is unclear how quickly any new funding will be made available or how many hoops car-makers might need to jump through to become eligible."

A spokesman for van builder LDV said: "We give it six out of ten. We welcome the government's focus on the development of green technologies and low-carbon vehicles, areas that LDV is leading on.

"However, the statement is detail-lite and there is no mention of how government can help stimulate demand for those vehicles and create the infrastructure to support it.

"To deliver these admirable aims we urgently need to hear from government the concrete steps to turn these plans into action today."

Shadow business secretary Kenneth Clarke described the measures as "pretty small beer", while the Liberal Democrats said they contained "worthy crumbs of comfort".

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