Mumbai, Nov 24: Tatas owned Jaguar Land Rover is reported to have had secret talks with British Government for financial support of one billion- pound loan just nine months after the luxury car company was bought, reported a British daily.
Quoting an unnamed government official familiar with the development, 'The Sunday Times' said British Prime Minister Gordon Brown is studying the request and an answer could be made in the next fortnight. According to the report, JLR Chief Executive David Smith has made a direct plea to the government for cash. He believes that with help being given to car makers in the continent and in America, Britain has a good case for financial aid. At the same time, the Society of Motor Manufacturers and Traders, which is representing the interests of the wider British industry, is seeking a state aid of 2-3 billion pounds.
Tatas are looking to the government for a bridging loan to help tide over the next 24 months, a period where the industry will come under further financial pressure and during this time it will be difficult to access funding markets, the report said.
The component suppliers to the automotive industry are also in difficulties, many of them already facing issues with credit insurance. Tatas paid USD 2.3 billion for JLR and financed the acquisition with a $3 billion (2 billion pounds) bridging loan.
Since then sales of new cars have plunged which has caused big problems with the cash flow needed to service debt payments. The report further said that the talks happen at a time when Tatas, one of India's most successful companies, is also facing financial issues. "It paid 11.3 billion dollars 22 months ago for steelmaker Corus and since then the metal price has collapsed," the daily said.
Similarly, shares in Tata Consulting Services, Tata Group's American-listed IT business, have also tumbled, as have shares in Tata Motors, the report said. According to the daily, Ratan Tata, chairman of the group, has put on hold further acquisitions amid difficulty in raising bank finance and in the face of the economic slowdown.
"Tata still has confidence in the future of JLR but believes he needs government help to tide it over for the next two years," the report stated. The daily also recalled Tata's comments at the time of the purchase last March. "These are iconic brands that I respect enormously. Our plan is not to tinker with them in any way," Tata had said.
The request demonstrates the sharp downturn in the global car market, which has already pushed a handful of the big car manufacturers to the edge of bankruptcy, The Sunday Times said.
Besides the motor industry, a number of large British- based industrial groups are also considering asking the government for financial support. If help is not given tens of thousands of jobs are at stake, the daily said.