Jaguar Land Rover Steers Clear Of Bailout – US-FOREX.US
Tata Motors, the Indian owner of Jaguar Land Rover, told the U.K. government on Tuesday it no longer needs support after securing private funding, the latest sign that credit markets have eased.Tata has secured some direct bank loans, as well as guarantees that would allow it access to a 340-million-pound European Investment Bank loan, the company said in a statement.Jaguar Land Rover, which was bought for 1.0 billion pounds over a year ago by India’s Tata, had been in discussions since late last year about the possibility of securing government help, given the tough credit market conditions. The British government had offered funding, but that didn’t materialize, as both parties disagreed on the terms of the cash injection. The luxury brand has been cutting production at its three main factories in the U.K., where it employs 14,500 people. “The fact that the banks and commercial capital markets are meeting Jaguar Land Rover’s funding is a clear sign of confidence in the company, its products and the automotive sector,” said U.K. Business Secretary Lord Mandelson, who played a key role in the negotiations with Jaguar Land Rover. A spokesman at the luxury brand said the new funding is a sign that credit markets are improving for the ailing industry. “There is certainly a change in the credit situation that has allowed banks enough freedom to provide the loans that we have been seeking,” said Don Hume, director of corporate and government affairs at Jaguar Land Rover. There has been recent evidence that credit markets are opening up for carmakers in Europe. Last month, Renault
said it had had easier access to credit markets, while PSA Peugeot Citroen
said it had enjoyed a substantial liquidity position in the first half of the year after its financial arm raised 1.5 billion euros in bond issues and 700 million euros from the European Central Bank.
But European carmakers will remain under pressure next year as government incentives, which have pushed demand over the last months, dry up, though easier access to credit makes their situation less stressful. “Cash flow is likely to be very negative in the second half, especially for volume producers like Renault,” said Michael Tyndall, an analyst at Nomura International in London.
Tata Motors
, which bought Jaguar Land Rover for 1.7 billion pounds in June 2008 from Ford, rose 6.6% in morning trading in New York.