Mixed response to Mandelson’s £2.3bn auto package

BUSINESS and industry leaders have given a cautious welcome to the £2.3bn auto industry loan package announced by the government, but question whether it will be enough.

Yesterday, business secretary Lord Mandelson set out a package of support for the sector that would give £1.3bn of loans from the European Investment Bank and up to £1bn of further loans from the government to fund investment in environmentally-friendly vehicles.

In his announcement Lord Mandelson acknowledged that the automotive industry had fallen “faster and further than any other sector since the summer” and that it is at the heart of many regional economies.

The North West is second only to the Midlands as the country’s automotive hub, with around 20,000 jobs directly involved with carmakers and a similar number employed among related service providers.

Trade union Unite warned that yet more support will be needed and expressed concern that it would be months before money from Europe could be unlocked.

Tony Woodley, joint general secretary, 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.  Ministers need to more than double the money available, and do so immediately.”

Jaguar Land Rover, which has been a particular focus of speculation about its future, employs 15,000 people with 2,000 at its Halewood plant. Earlier this month, the Halewood plant cut production to one shift a day and just before Christmas it warned there would be more redundancies if it didn’t get financial support.

A spokesperson for the company said it was “encouraged” by the announcement and looked forward to learning more about how the funding package will work.

“Through this move the government has recognised the strategic economic importance of the car industry in the UK as a major provider of high-skilled jobs and a significant contributor to our balance of trade.

“The specific nature of the challenge we face is that credit has dried up at the same time as demand evaporated, but it is absolutely critical for the future competitiveness of this country that we have a strong and highly-skilled engineering and manufacturing workforce in place to drive green technology innovation.”

Meanwhile, Vauxhall’s Ellesmere Port plant, which employs 2,200 staff, has offered workers an eight-month break on 30% pay, with them returning in September when the plant starts building the new Astra.

Vauxhall’s parent General Motors cautiously welcomed the announcement. “We look forward to further clarification from Lord Mandelson at the Motor Industry summit meeting [today] before we can consider the short and longer term implications of the support plan,” it said in a statement.

Richard Lambert, CBI director general, also expressed concern as to  how quickly any new funding will be made available.

“The UK’s automotive sector is among the most efficient in the world, a major employer and a critical part of our manufacturing base, but it has been crippled by a lack of credit at a time of a very steep reduction in demand.

“The industry relies on credit to complete customer purchases. Without access to that credit, car-makers will continue to scale back production and cut jobs,” he said.

But Liverpool-born entrepreneur Michael Welch, founder and managing director of online tyre retailer Blackcircles.com, took a much tougher line.

He said the rescue package won’t succeed unless it is selective and comes with conditions that address the “inherent problems” of large car manufacturers.

“The government’s responsibility is to ensure that any business it helps with taxpayer’s money is well run. Any loan guarantee scheme needs to come with strict conditions to ensure the inefficiencies of these companies are addressed.

“Many of the bigger brands are riddled with inefficiencies and layers of unnecessary cost and it’s no surprise that they have started to look fragile in an economic downturn. To call these businesses fundamentally sound is misguided.”