Banks accused of failing to support UK car industry

Leading banks have come under attack from the motor industry, amid claims they were unwilling to lend money to car firms as they battled to recover from the recession.

Senior officials from the Society of Motor Manufacturers and Traders have held talks with banks to try to speed up loans, but were left with the impression that they were unwilling to help. One car industry executive privately accused bankers of a "lack of sensitivity" about the world of business.

"Unless you are a global vehicle manufacturer or an internationally-based supplier, they are not interested in lending you money," he said.

Paul Everitt, chief executive of the SMMT, revealed today that he has held talks with banks including Barclays, Lloyds and HSBC in recent weeks about loans to car firms. One banker told him: "We are not going to make any money out of that", while another said: "If the suit industry had fallen by 30 per cent, we would treat them the same way."

Mr Everitt said: "I think they are making a mistake because they don't understand the strategic shift to our industry and the economy. We will get investment in the UK, but it will be from foreign banks who are prepared to back UK manufacturing. That cannot be in the long-term interest of their business."

Mr Everitt also revealed that the Government's Automotive Assistance Scheme, launched almost a year ago to administer £1 billion of loan guarantees from the Government and £1.3 billion of loan guarantees from the European Investment Bank, has not supported a single scheme.

Business secretary Lord Mandelson announced the programme on January 27 last year, but no loans or loan guarantees have been given to any motor firms.

The SMMT predicted an "extremely tough" year for the motor industry in 2010, with car sales expected to reach 1.8 million, around 10 per cent down on last year. It said this month's increase in VAT and the ending of the car scrappage scheme, expected next month, would both impact on the industry.

"There is concern that a fragile recovery, the VAT increase and the ending of the scheme will mean another tough year for the industry," said Mr Everitt.

"The focus now is on ensuring that the Government does all it can to sustain and strengthen the economy. Consumers, dealers and companies in the supply chain are still finding it difficult to secure affordable finance. More pressure needs to be brought to bear on the finance community to support the wider economy," he said.

A banking source close to the talks with the SMMT said the talks were productive and held in an atmosphere of "mutual understanding", adding: "I am surprised by the comments, which do not reflect the constructive tone of the meeting."

Car production slumped by 30 per cent

The SMMT also announced that car production slumped in 2009, driven down by the depressed state of the motor market in the early part of the year. Commercial vehicle (CV) production also took a battering, the organisation’s figures showed.

Despite excellent December 2009 results, the number of cars produced last year was 30.9 per cent down on the 2008 figure. In total, 999,460 cars were manufactured in the UK last year. CV production totalled 90,679 - a 55.3 per cent drop on 2008.

The industry could at least take heart from the December 2009 figures which showed that car production rose 58.5 per cent compared with December 2008 - the biggest monthly increase since May 1976. CV production last month was up 15.6 per cent compared with December 2008.

SMMT chief executive Paul Everitt said today: "The significant rise in December vehicle production is welcome news and signals some greater stability across global automotive markets. We expect the year ahead to be extremely challenging, but the return of economic growth and a competitive exchange rate will help UK producers.

"Car and commercial vehicle production remain well below pre-recession levels and it is essential that there continues to be a focus on creating more and better-priced finance for businesses and consumers."

The main damage was done in the first part of the year when the lack of consumer demand led many car companies to cut production.

The introduction of the Government's car scrappage scheme boosted both production and sales in the second half of 2009. However, the scrappage scheme is due to end soon and the worry is that the recent sales and production surge could cease.

Business minister Ian Lucas said: "The automotive industry has had a difficult year, but industry and Government have taken action to help manage the challenges. The £400 million scrappage scheme has helped boost demand and even enabled some companies to boost production - like Nissan in Sunderland.

"The end of 2009 saw some exciting developments for the industry in the UK. Vauxhall and Honda began production of their new models, Toyota announced the UK would be the first European plant to produce its first hybrid Auris vehicle, and BMW announced that it will build two new Mini models at its Cowley plant."

A Business Department spokesperson added: "The industry has had a tough year, and has responded well to the challenges. It is important to remember that the 2009 production figures reflect the extended shutdowns over the summer, which was a way of managing the downturn in demand without losing capacity.

"The SMMT's figures have consistently shown the Government's scrappage scheme has boosted the industry, and consumers still wanting to benefit from the scheme should put their orders in quickly as time is running out."

Related stories:
New car sales hit 12-year low 
Manufacturing outlook 'improving slightly' 
More pressure on banks to lend to small businesses 
Scrappage scheme eases car-makers' woes

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