Business Secretary Peter Mandelson said the UK government will offer carmakers 2.3 billion pounds ($3.2 billion) of loan guarantees to help them cope with the recession and adapt to new environmental rules.
Manufacturers will be allowed to tap £1.3 billion of financing the European Investment Bank made available to UK companies last year and another £1 billion of backing from the Treasury. The funds come from programs set out in a budget statement in November.
“The auto industry has taken the brunt of the downturn far more quickly and more deeply than other industries,” Mandelson said in the House of Lords in London today. “It would be appalling if we would take the downturn, ride out the recession and let a key sector like this go to the wall.”
UK car and truck production tumbled 49 per cent in December, the most since August 1979. Companies including General Motors Corp’s Vauxhall unit and Jaguar Land Rover, owned by Tata Motors Ltd of India, have been asking for aid for more than two months.
“This is the correct decision,” said Debasis Ray, a spokesman for Tata Motors in Mumbai. “The auto industry in the UK required support to face the tight liquidity conditions to fund ongoing research.”
Financing Help: Mervyn Davies, who stepped down as chairman of Standard Chartered Plc on January 14 to become a trade minister, will look at ways of helping the finance arms of car companies access money.
The loans announced on Tuesday will be available for the next two years, the Business Department said in an e-mail. Makers of construction equipment will also qualify for the aid.
The UK industry supports 850,000 jobs and produced 1.65 million cars last year, 76 per cent of them for export. Other European governments already have extended aid to their automakers, and the European Union has promised to step up subsidies for research.
