Mandelson's £2.3bn for car giants is 'no bail-out'

Published on Tuesday 27 January 2009 20:59

THE government yester- day unveiled a long-awaited £2.3 billion 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.

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

But the joint leader of the Unite 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 today 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 1.3 billion from the European Investment Bank as well as guarantees of support of up to a further 1 billion for lending and loans.

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 that have been pressing for action for months.

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

Lord Mandelson also announced increased funding for the 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 yesterday's package applied to projects over 5 million from UK-based vehicle manufacturers and parts suppliers with an annual turnover of 25 million or more.

Tony Woodley, Unite's joint leader, 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."

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

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 that have been hit.