£27m public cash for Land Rover to build an eco-car

Published on 11/03/2009 20:50

CAR maker Jaguar Land Rover was offered a taxpayer-funded £27 million boost yesterday to make an eco-friendly car as part of a government effort to shore up the beleaguered industry.

The money will be given once Jaguar, owned by the Indian firm Tata, gives the green light to producing the car, a compact, lightweight Land Rover LRX.

A decision on whether to go ahead with production of the concept car is due later this year. The project is worth 400 million and could safeguard jobs at the firm's Halewood factory on Merseyside. It is also likely to trigger a flurry of appeals for help from other manufacturers.

The cash offer came as ministers met representatives of the automotive industry, bankers and union leaders yesterday to discuss a separate 2.3 billion fund, made up of 1.3 billion in loans from the European Investment Bank and 1 billion in loan guarantees from the UK government. The Automotive Assistance Programme was announced in January as a way of saving the British car industry from collapse. Industry bosses cautiously welcomed the first tranche of help, but questioned whether it would be enough.

Tom Purves, chief executive of Rolls-Royce Motor Cars, said: "When you have the world market down by 30 or 40 per cent, that is a tsunami, so to speak. You have to make adjustments."

Erik Eberhardson, who is leading a management buy-out of LDV vans in Birmingham, which has not produced any vehicles since before Christmas, said the government seemed to be backing the "tortoises not hares" of new, green technology.

"We fully support their objectives, but surely it makes sense to support companies like LDV that are ahead of the game.

"We don't want a bail-out, rather targeted support for a company that has invested heavily in electric vehicles. What sense is there in letting world-leading low carbon potential in Birmingham be lost?"

Ministers are also believed to be considering a scheme where owners of old cars are offered cash incentives to trade them in for new ones.

Last night, Lord Mandelson admitted negotiations with the Treasury and Bank of England over help for car financing schemes had gone too slowly. The Business Secretary said progress was being made on a deal to provide people with credit to buy vehicles, but he wished talks were going "quicker".

Pressed on whether the Treasury and the Bank were holding things up, Lord Mandelson said: "I wouldn't put it in that way, no, because they are our colleagues and they're doing their best to find the right area. This is a very complex area."

But David Frost, director general of the British Chambers of Commerce, has urged the government to offer greater help for the car industry. He pointed to a cash-for-scrap scheme in Germany that boosted car sales by 22 per cent in February. "There has been much talk about helping the industry, but we now need to see action," he said.

Meanwhile, there was bad news for the industry yesterday when Toyota announced a 10 per cent across-the-board cut in pay and hours.

The car giant employs 3,900 people at its main factory in Burnaston, near Derby, and 570 at its engine plant in north Wales. It has already slashed 200 temporary jobs and called for voluntary redundancies.

In a statement, the company said it had been "agreed" that the one-year 10 per cent wage and hours cut was the best way to save jobs in the long term.

"We believe the measures we have announced give us a greater opportunity to maintain employment through this difficult period," it said.

Union sources said workers had a basic pay of about 19,000, so would be losing 1,900, while the cut in production meant that employees would not attend work on two days a month.

The factories will produce no vehicles or engines every other Friday.

Peter Tsouvallaris, a Unite union representative at Toyota, said: "Any decision to cut wages and working time is never taken lightly. But the agreement we have reached with Toyota will ensure none of our members' benefits are eroded and that these skilled workers will remain in place and at work ready for when the upturn comes."

DRIVING IN A NEW DIRECTION

THE four-seater Land Rover LRX concept car was the star of the 2008 Detroit Motor Show and could be on sale by the end of next year.

The finished article will not be exactly the same as the concept but will be based on it.

Detroit was shown a vehicle with a tapered rear end and with a bonnet different in shape to the Land Rover Freelander.

Land Rover has described it as carrying the company into "a segment where the brand has never been before".