Emergency rescue plan for British motor industry

The Vauxhall factory at Ellesmere Port, Cheshire, yesterday. The struggling company has offered all 4,500 workers at the plant a sabbatical of up to nine months on 30 per cent pay

A financial rescue package for Britain’s motor industry was being put together last night, mirroring efforts in Washington to save America’s three big carmakers from collapse.

Lord Mandelson, the Business Secretary, and Alistair Darling, the Chancellor, may offer bridging loans on commercial terms to vehicle and component manufacturers and wider guarantees for loans from banks.

The peer is in regular contact with the industry, which has reached a crisis point. Several carmakers plan extended shutdowns over Christmas, leaving them with vastly reduced sales income but with salaries and other bills still to pay.

Suppliers, many of them small companies, are demanding weekly payments to secure their cashflows and stay in business. One firm, Wagon, has gone into administration with the loss of 500 jobs. If the supply chain crumbles, tens of thousands of jobs will be lost. The components industry supports 115,000 workers, while manufacturing employs 190,000 and the whole industry, including retail, 850,000.

Vauxhall, which is seen as vulnerable because of uncertainty over its American parent, General Motors, underlined the need to cut costs yesterday by offering all 4,500 staff at its Ellesmere Port factory in Cheshire a nine-month sabbatical on 30 per cent pay. The move is an attempt to cut costs in the face of plummeting demand and the credit crunch.

As workers left last night for a one-month shutdown, uncertainty in the industry was compounded by production cutbacks at the Ford plant in Halewood, Merseyside.

A Vauxhall spokesman admitted that the sabbatical would not be welcomed by most workers. “It will probably suit younger people who may live at home and don’t have a mortgage and want to travel or older workers who have paid off their mortgage and want to do the same,” he said.

Basic pay at Ellesmere starts at £342 a week, so an employee would have to be able to manage on £102 a week before tax. Workers can take up the offer for a minimum of two months or a maximum of nine months starting in the new year. Apart from its Ellesmere Port workforce, Vauxhall employs 500 people elsewhere.

Senior executives met ministers this month to warn them of the dire state of their industry. A spokesman said that operations in Britain were stymied because of the impossibility of getting customer finance.

The government package to ease the credit problems could come within days but The Times has also learnt that ministers are considering a plea that the industry be given access to the £200 billion Bank of England liquidity scheme introduced to try to unlock lending.

In what would be a radical move, manufacturers and suppliers are arguing that with the banks still reluctant to lend, they should be able to borrow cash from the Bank on market terms.

News of the developments emerged as the White House confirmed that it was considering using its own $700 billion (£467 billion) bank bailout package to help carmakers after the $14 billion (£9 billion) rescue plan for General Motors, Chrysler and Ford failed in the Senate.

The Treasury appeared cautious last night over whether the liquidity scheme could be adapted for use by the carmakers and suppliers. There are clearly fears that other troubled industries would then apply for money from the same pot. But government sources confirmed that other ways of easing the industry’s credit problems were being considered. An announcement before Christmas is still possible.

Although Lord Mandelson is insisting that there can be no blank cheques, industry sources said that company chiefs believe that he and the Government are sympathetic.

The Business Department said that it was monitoring the US situation. “As ministers have said, they want to do all that they sensibly can to help viable businesses,” a spokesman said.

Paul Everitt, the chief executive of the Society of Motor Manufacturers and Traders, said the need for help was urgent. He said: “It is a very difficult situation. With the longer Christmas shutdowns, bills are going to have to be paid but no cash is coming in.”

Crash victims

The big three: General Motors, Ford, Chrysler

Marques at risk in Britain: Ford, Volvo, Mazda, Saab, Vauxhall, above, Chrysler, Jeep, Jaguar, Aston Martin
Chassis numbers

850,000 Number of people employed across the car industry in Britain in manufacturing, service and retail

410,000 People directly employed by General Motors, Ford and Chrysler worldwide 3m Jobs at risk in the motor and related industries in the US if the Big Three companies collapse

$151bn The potential income at risk from a Big Three collapse

£342 Weekly starting salary of Vauxhall workers at Ellesmere Port

450,000 Ford vehicles sold in Britain annually

331,321 Vauxhall cars and vans sold in Britain last year

December 13, 2008
Philip Webster, Political Editor and Christine Buckley, Industrial Editor

Source: The Times

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