London: Tata Motors Ltd-owned luxury car brands Jaguar and Land Rover (JLR) may have to wait longer for the support promised by the UK government.
Cash crunch: Tata Motors is unwilling to accept UK government’s demand for 15% interest on the loan and veto power on the board. Graham Barclay / Bloomberg
Last month, European Investment Bank sanctioned a loan to develop Land Rover’s new LRX model. This loan, part of Britain’s £2.3 billion (Rs17,204 crore) support to auto makers, has been held up. But more seriously, so have larger guarantees of support for JLR’s immediate cash flow problems.
“Companies are experiencing short-term cash flow issues. Governments have been looking to bolster long-term projects, and that’s not enough,” said Nicky Rook of industry lobby group Society of Motor Manufacturers and Traders. “We need to make sure that immediate cash flow issues are resolved.”
A resolution was expected in the form of a rescue package totalling nearly £800 million—£340 million from the European Investment Bank and up to £450 million from UK banks underwritten by the government.
Media reports suggest that the British government wants interest on the loan at 15% and a veto power on the company’s board, which Tata Motors is unwilling to entertain. However, with car sales still in a serious slump, JLR is running out of time.
“I think there will be need for some quick action because the losses of many car companies in Britain, Europe and the world over are running up very rapidly,” said Paul Horrell, consulting editor? at Top Gear magazine.
Opposition from within the British government over JLR’s Indian ownership may also be responsible for the delays. “You can imagine from a PR (public relations) point of view, for a UK government to be giving cash handouts to an Indian billionaire who has recently bought JLR and the potential for that cash to leave the country, would play out very badly in some of the newspapers in Britain,” Horrell said.