Motor trade organisations appeal for government funding
19 November 2008

Britain’s two biggest motor trade organisations are openly lobbying the Government to assign financial support for the beleaguered car industry.

In a joint effort, the Society of Motor Traders and Manufacturers (SMMT) and the Retail Motor Industry Federation (RMIF) are proposing a package of loans and legislative changes intended to stimulate the UK vehicle market.

In a letter to Chancellor Alistair Darling and business secretary Lord Mandelson, both organisations called for car manufacturers and suppliers to have access to government-backed loans to help them stay afloat.

They also want plans to increase road tax scrapped and an increase in allowances for business car users.

The letter argues that motor finance companies should have access to the same loan arrangements as the banks, helping to reduce the effects on them of the credit crunch. This is manifesting itself as a lack of finance to help people buy cars, and also to let dealers fund purchase of stock.

Autocar understands the joint RMIF and SMMT proposals are supported by many of Britain’s major car makers, particularly Jaguar Land Rover.

“It is vital that the motor industry present a united front at this time,” said RMIF chairman Paul Williams. “These measures would go some way to helping the revival of consumer confidence in our sector.”

“Urgent action is required to boost demand for new vehicles and ease pressure on UK automotive suppliers,” added SMMT Chief Executive Paul Everitt.

Chancellor Darling delivers his pre-budget report next Monday (24 November) when both organisations hope he will support at least some of their proposals.

Will Powell

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Comments
14

19 November 2008

I do not think the auto companies in the UK should not have a bail out, in the US that is different, Ford, GM and Chrys. should have a bailout as they are US owned (GM is asking in Germany I realise but that is up to Germany); but Jaguar and Landover are not UK owned they are owned by TATA.

Furthermore, TATA knew the market position when it took over the companies, it knew that the 4x4 market was tanking and that the large car market was suffering.....it knew that (or should have) when it took over the companies; thus it is very different to the position of the US manufacturers.

Also the US comapnies provide a range of vehicles whereas Land Rover and Jaguar do not....I think it also true to say that the baby Jag was way over priced and for all Jaguars, they do not hodl their value unlike Mercedes.......Jag has still got a lot of troubles and its not just down to the market......the bouyent market previously just covered them up......so Jag and Land Rover shoudl not get bailed out.......if they were UK owned comapnies........trying to stand on their own two feet..........but they are not they are part of a massive group that has deep pockets and knew the position of the market/company structures when it took them on........the UK part goes for other auto companies i.e. if they are UK owned......that is different.......Ariel for instance.....Ford kept Jag afloat for years........maybe it was time Jag was left to die and rebirth into something else......or TATA should start and place its money where its mouth is........TATA bought them...they knew what they were doing......and if TATA wants to appeal to a government, appeal to its own

19 November 2008

'North', well said Sir.

For the UK taxpayer to fund Tata now, when the average Brit is broke, and facing redundancy himself is insulting and economic madness. Taxes will have to rise to pay for this largesse with a foreign businessman. If not taxes to rise the Labour govt. will print money to pay for this bailout and all the other 'fiscal stimuli'/bailouts to follow. This will destroy what is left of the value of the pound and consequently all the savings of Britons. Britain will become Zimbabwe.

For JLR to receive British taxpayers' money equity or ownership of the company and its viable assets will have to be taken. Loans for equity. Under no circumstances must taxpayer money flow from JLR to Tata. The German govt. has stipulated that any money given to Opel must not find its way to GM. If the state of the accounts at JLR are so bad that equity for the taxpayer would have liitle or no value then the only real decision to make is whether the whole company is nationalised or let go bankrupt. If it's to be nationalised, Tata must not receive anything for its ownership, i.e. wiping out of 100% of shareholding. Personally, I would rather see it go bankrupt if it is not commercially viable. As North said JLR's products are, with exception of one line, massively out of favour in the market. There is no prospect of a 2002-2007 type bubble market coming back before 2011 at the earliest or even a moderate economic upswing. If it's bailed out, like GM in the States, the taxpayer will be asked for more money time and time again.

This turn of events was predicted by myself at the time of Ford first mooting the sale of JLR. Almost two years have passed and yet all that's come out of Tata owned JLR since acquisition is hubristic tales of expansion - first headline after Tata's purchase was '600 engineers to be recruited by JLR'. Like so many British companies before them, Rover and Phoenix Four, most recently, the lure of glossy PR releases and visions of bright new product ranges meant the neglect of the bread and butter business base. Sad truth is, it was clearly apparent back in early 2007, when Ford was trying to get rid, due to its own impending bankruptcy, that there wasn't a viable business at Jaguar & Land Rover beyond six to twelve month horizon from Ford's £1bn dowry cash injection. Tata, through its acquisition has demonstrated very publicly his poor judgement of the car market and business generally. The collapse in credit in UK in 2008 and in US in late 2007 has exposed JLR for what it was since many years - a luxury business in every sense and one that could only exist and thrive in a once in one hundred years freak market.

19 November 2008

JLR are in one hell of a better position than under Ford, yes pennies will be watched in this troubled time but no matter what you read on the net, TATA have the funds to make JLR a success.

The one thing that people forget is that it is not just JLR in the UK producing cars but also Nissan, Toyota, GM and Ford, I think you will find that the SMMT are requesting assistance for all these manufacturers that have a UK workforce.

Hey if we can bailout the banks then why shouldn't we help the motor trade workforce in the UK?

Global Warming.. My Rs

19 November 2008

The UK vehicle market is stimulant enough. What their really proposing is more debt, nothing more.

LP of http://www.autoinsurancecity.blogspot.com

19 November 2008

In the US and the UK, and anywhere else for that matter, the question of who owns motor manufacturers is a minor consideration for politicians faced with redundancies that could run into six or seven figures. What is important to them is getting the production lines rolling again and shaping these companies into something viable on a day-by-day basis. These are businesses that are simply too big to be allowed to die, even if the state ends up doing things that would have been deemed unthinkable a little while ago.

However, a lot of motor manufacturers have only themselves to blame for the direness of their current position - JLR being among the biggest culprits with their range of 4x4s in L and XL sizes only and luxury cars almost exclusively styled to appeal to people with a predeliction for tweed. Even the slightest downturn would've hit them hard.

19 November 2008

Well Said horseandcart

I think though Ford itself maybe okay.....if you look at its product strategy it might be close, but I think Ford itself will be fine; its product mix is very good and clever, its good timing and final good positioning.

As said, if the UK taxpayer was being asked to help Ariel or another British company with a good product and developing business......that is a different story entirely; but to help an overseas firm.....TATA said they were not going to close the car firms down, no massive job losses (if I remember correctly)....yet here we are.....the UK gov. should not bail them out....no way......the workers will get re-employed.....I come from a mining background and watched as an entire industry shut down, same with shipping and it hit steel......I was opened to market forces early in my life......they will find work.....all those engineers into the work place.....superb.....a boost to UK industry....but TATA should not get any UK tax payers money.....TATA knew the market when it was taken over.....the time for the gov. to get invovlved was then......not now......all the gov. get now is heaps of debt.....look at Leyland......I do not want that.....if they go bust, they go bust....I think they will grow again and be stronger...its just starting over......its what they need....but but why should the UK bail out and overseas firm......will the Indian Gov. give TATA a bail out......that is where TATA should go first......its an idian firm not a UK firm.

I think the chap jaydub is kinding themself, Land Rover needs three new products, Jaguar needs at least three new products.....lets put that into context...say £1.5bn development cost per product.....that is £9bn.....say they make £200 million profit per year.....in a nut shell they cannot afford one new car let alone 6.....even with platform sharing they do not stand a chance; you would huge sales.....and they do not have it.

JLR had/have so many issues, they have no money, they have one car and maybe the freelander replacement (notice its not out yet.....something to do with cash??); fair enough you could build a car company from one car.....but that assumes you are not building several others that do not do very well.

JLR had billions pumped into it by Ford and what happened......did they take advantage of Ford expertise and develop a rival to the A3...no......(it would have been a good move)..........Ford supported them for years and hats off to Ford......but JLR needs to contract, sort itself out.....and effectively kind of start again and find itself.....realise that the Jag name is not what it was......realise the car market has changed.......as horseandcart said it takes more then PR; Jag was part of romance.....but it takes more than romance to sell cars.......look at the residuals on Jags............Jag just seem unable to cope, i think they just do not get it......and that is not the fault of Ford.....Jag blow it.......for me they should let them go bankrupt...then lets say they wanted to start again.....with a proper business plan.....a couple of proper cars.....then the UK gov. should kick in........the XF and the freelander replacement.....coupled to some hybrid drive system i.e. like the Chevy Volt NOT the Toytota system.......now then I think the UK gov. shoudl support them......maybe Chevy (GM) would sell the system they have to a new and bubbing UK company......start a fresh.........XF, LRX and a small "edgy" car.......with the Chevy Volt drive systems.....then the UK gov shoudl throw in some starter money........now that would be good, but JLR has to go bust to do that and the engineers really need to be up for it!......

19 November 2008

North, just to clarify, when I said 'Ford's own impending bankruptcy' I meant Ford Motor Company, or Ford's North American operations more specifically. Ford of Europe is a decent outfit that deserves to survive.

19 November 2008

I think "bail out" was a strong phrase, given the proposals. What they're asking for is the postponement, or cancelling of punitive measures on CO2 emissions etc. Finally they are asking for car financing companies to be given the same agreements as other UK banks with regards to loans; "sensible", low risk loans would help stimulate the car market without building the excessive debt problems that plagued our markets beforehand. It wouldn't sort all the problems out, but could be enough to see sales rise even 5%-10% would see jobs saved, meaning more disposable income, more money spent etc and the UK starting to recover. I actually back most of the changes suggested.

19 November 2008

[quote theonlydt]Finally they are asking for car financing companies to be given the same agreements as other UK banks with regards to loans; [/quote]

What do you mean by this? Do you mean auto financing companies, like GMAC, or Ford Credit, should be regarded as banks, credit companies/banks which happen to be insolvent and therefore in need of 'recapitalising'? If so, spit it out. Firstly, nearly all these auto finance companies will be foreign owned. Secondly and most importantly, you''re arguing for British taxpayers to pay more tax or have their currency and savings devalued further by flat out fiat currency printing in order to 'start to recover the UK[economy]'. If this was so why not cut out the middle man and just cut everyone's taxes immediately, by an amount calculated to that needed to kickstart the economy - one per cent of GDP, £15bn? 2%/£30bn? £100bn?. I'm sure a halving of PAYE or raising of the tax threshold by 100% would do wonders for new car sales and indeed most all consumption. However, there's a problem with this. It's been tried, don't work, will never work. America tried this back in the Spring, with a 1% of GDP tax rebate stimulus. Generally it was either spent on useless Wal-Mart imports, used to pay off existing debts or saved/held back by the smart people in the sure knowlwdge that their tax bills would go up in short order to pay for this tax 'giveaway'. If your theory held, hell why not just instead of giving the bankers and auto finance execs £50bn to play with, why not just send cheques to each household for ~£2,000.

Don't get suckered by this nonsense. You're being sold fool's gold. There's been the mother of all credit bubbles. It's burst. Companies and individuals need to go bankrupt until supply and demand come back into some sort of balance. The quickest way for that to happen is for prices to fall, across the board. If JLR or any automaker can't make money by dropping prices 10, 15, 30%, whatever it takes, then they must go out of business. Same with houses. Once houses come down by 40, 50, 60% people who have savings will see real value in buying them.

You're dreaming if you think a rise a rise of 5-10% will see jobs saved. The US and UK auto industry has just suffered a 40% shake-out in demand. That's about 6m cars in US case and about 1m in UK. Those sales ain't coming back, ever. They were driven by freak credit supply and mortgage equity from house prices. It's called survival of the fittest. The UK and US need to adjust to a poorer future, one where they start living within their modest means. No 10% trade deficits, no 10% budget deficits, no loose credit full stop, in essence. It's gonna hurt like hell, but it's as nothing to going down the Keynesianism on acid route bailing out all debtors, banks, large companies, etc. that UK has embarked on. That way leads permanent slump with no prospect of recovery and before long no takers for Govt. debt, treasury gilts, and then the call to the IMF for bailing out, a la Iceland. And then, absolutely screwed.

19 November 2008

[quote horseandcart]There's been the mother of all credit bubbles. It's burst. Companies and individuals need to go bankrupt until supply and demand come back into some sort of balance.[/quote] I don't disagree with most of what you say. Other than that there should be a multi-pronged approach. I had a 2% tax cut last year; it equated to £8 a month on my pay cheque (what with the doubling of my student loan rate on the £3k loan I had to take to become a teacher, the increase in national insurance, the extra slice my pension took etc). A 1% or even 2% tax decrease will make very little difference to people's spending power currently.----------------------------------------------------------------------- Also I believe that pure capitalism, supply, demand etc does not work and does not always act in our best interests. The continent has an approach where there is more government intervention, mostly based on socialist and protectionist ideals. While not totally condoning these they have been protected from the worst ravages of the current economic climate (no doubt one French car maker will look like going under though) - the price they paid was a lower % of GDP growth during our growth period - which as you correctly state was based on false credit and the belief that house prices would continue to rise.--------------------------------------------- To tackle the current problem there has to be the understanding that manufacturers must cut prices, dealers must cut their profits too. Some may well go under. I hate to say it, but I'm quietly grinning that Mini sales have slumped, despite good fuel economy I have always seen it as totally over-priced compared to the practical value - making it a luxury item. Therefore sales have plummeted. Shame it's made in the UK really. It would just be a shame that if car companies are going to go under then UK dealers and makers go under first, because we are not prepared to bankroll them as no doubt the French Government will for theirs and the German Government are considering for Opel.

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