The United Kingdom’s business secretary Lord Mandelson on Tuesday afternoon outlined a package of government support for the local vehicle industry worth up to a potential GBP2.3bn ($US3.17bn).
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The package includes a scheme to lend automakers and suppliers GBP1.3bn from the European Investment Bank and another GBP1bn in loans to fund investment in environment-friendly vehicles
“The car industry has taken the brunt of the economic downturn,” Mandelson told the (upper) House of Lords after outlining his package.
Earlier, he had said the car industry was “not a lame duck” and that the package was “not a bail out” but would “reinvent” the industry “for a low carbon future”, the BBC reported.
He also told peers the automotive industry was “in the frontline of the downturn” and had fallen “faster and further than any other sector since the summer”.
The car industry was vital to British manufacturing and was at the heart of many regional economies, he said.
He said many of the government’s measures, like the recent 2.5% VAT [sales tax] cut, had already benefited the industry, but added: “I recognise that we need to do more. Today’s measures will provide a specific boost to the industry, providing real help and laying the foundations of its reinvention for a low carbon future.”
“There is no blank cheque on offer, no operating subsidies,” Mandelson said. “We are committed to ensuring that anything backed by the scheme offers value for taxpayers’ money, enables us to green Britain’s economic recovery, delivers significant innovation in processes or technologies for the long term, supports jobs and skills in Britain.”
Lord Mandelson also said spending on skills training for employees would be boosted to GBP100m from its current GBP65m, if there was demand from the industry, the BBC added.
Trade and investment minister Mervyn Davies had been asked to draw up plans to improve access to additional funding for car companies’ financing arms.
The car industry had to change to succeed in the “new world” and had to be cleaner and greener, Lord Mandelson said.
But he added: “This industry is not a lame duck and this is no bail out.”
Mandelson detailed the assistance package in the House of Lords ahead of a meeting with car industry representatives on Wednesday.
“This is an important announcement that recognises the strategic contribution of the motor industry and follows action in other EU member states, the US and Japan,” said Society of Motor Manufacturers and Traders (SMMT) chief executive Paul Everitt in a statement.
“The UK motor industry is productive and globally competitive with a long-term future at the heart of the low carbon agenda. We look forward to discussing the substance of the announcement at our meeting with Lord Mandelson tomorrow.”
The UK is home to 27 car and CV manufacturers and builds 1.75m cars and commercial vehicles a year.
The auto industry, which employs over 800,000 people, had previously stressed it did not want a taxpayer bailout, as given recently to the banking sector, and had called for a package much as Mandelson announced today.
UK sales fell 11.3% in 2008 and production last month was off 47.5% last month and down 5.7% for the year, according to the SMMT.
“The dramatic fall in demand for new vehicles around the world, combined with the limited availability of funding and liquidity now puts at risk valuable industrial capability,” the SMMT said in an earlier statement ahead of Mandelson’s announcement.
“Urgent action is required to boost demand for new vehicles and ease the short term cash flow pressures on UK automotive manufacturers and suppliers.”
Nissan recently axed 1,200 jobs at its Sunderland plant and Honda has mothballed its Swindon plant until June. Other automakers have laid off temporary workers and are on short-time working to reduce inventory.
Mandelson was in India last week and had talks with Tata Motors, owners of luxury car maker Jaguar Land Rover which announced 450 job cuts two weeks ago due to falling demand, the Daily Telegraph reported on Tuesday.
