Car trouble

UK business secretary Peter Mandelson has unveiled his government’s £2.3bn support package to aid the country's troubled car industry - but trade unions warned that the help would arrive too late.

The government’s proposed measures include unlocking up to £1.3bn in loans from European Investment Bank (EIB) guarantees and offering up to £1bn to non-EIB backed low-carbon projects.

The announcement also included a commitment from the Department of Innovation, Universities and Skills (DIUS) to offer automotive employers improved access skills support through the its ‘Train to Gain’ service.

Speaking yesterday at the House of Lords, Mandelson said: ‘Britain needs an economy with less financial engineering and more real engineering. The car industry can and should be a vibrant part of that future.

‘The steps we are taking today will help companies speed their way to becoming greener, more innovative and more productive. This is the route to securing jobs for the long term as we build a more balanced economy for Britain's future.’

He stressed that the funding would be directed at major new low-carbon investment projects and avoided any suggestion that it offered a bailout to the ailing car industry, which employs almost one million people in the UK.

The support package will apply to projects worth more than £5m from UK-based vehicle manufacturers and suppliers with a annual turnover of more than £25m.

In response to Mandelson’s announcement, Trevor Mann, Nissan’s senior vice-president for Manufacturing in Europe, said: ‘Nissan welcomes the announcement of measures to encourage further investment in the research and development of green technology, products and manufacturing processes, as well as additional funding being made available for employee training.

‘We are also encouraged by the specific instruction to Mervyn Davies to draw up plans to improve the access to finance for the financial arms of vehicle manufacturers.’

Dave Shemmans, chief executive of engineering solutions provider Ricardo, said: ‘Perhaps the most welcome aspect of Lord Mandelson’s statement is the focus placed upon the needs of research and development ,and, specifically, the positive encouragement of low-carbon vehicle technologies.

‘By focusing the available loan guarantees from the EIB and UK government on green initiatives, the UK is setting a public policy framework that is now much better aligned with the needs of tomorrow’s low-carbon motor industry.

'This positively reinforces the existing efforts of the Technology Strategy Board in this area, to which we also welcome the invitation to the regional development agencies to add their further support.'

However, trade union responses were less optimistic, with Britain’s largest union warning that more support will be needed if the UK’s car industry is to survive.

Tony Woodley, Unite’s joint general secretary, said: ‘Today’s statement will come as a massive disappointment to the tens of thousands of workers employed in or dependent on this vital industry.

'Two billion pounds sounds like a lot of money, but at least half of this will be taken up by Vauxhall and Jaguar Land Rover alone, leaving little or nothing for the hundreds of component companies.

‘This is a fraction of the support being given by almost every other government in Europe. Ministers need to more than double the money available and do so immediately. Make no mistake, we will be continuing to fight for more assistance from government for this industry.

‘The spectre of redundancy is still hovering over thousands of skilled jobs. We desperately need to see creative action, such as reduced hours with pay losses made up by the state. Support for the credit arms of the car companies is also vital to keep product moving.’

Richard Lambert, the CBI’s director general, said: ‘This announcement is a positive first step but it is unclear how quickly any new funding will be made available or how many hoops car-makers might need to jump through to become eligible.

'The industry relies on credit to complete customer purchases. Without access to that credit, car-makers will continue to scale back production and cut jobs.’

With a significant portion of the funding expected to go to Jaguar Land Rover, the viability of the government’s support for green technology has also come into question.

Barry Shiers, chief executive of Oxford-based electric car manufacturer Liberty eCars, said: ‘We want to say to Mandelson, instead of supporting businesses today by making cars that people don’t want to buy, why not stimulate the industry to make zero-emission cars that people do want to buy?

'However, this will not be achieved if the vast majority of the money intended to support low-carbon programmes is going to Jaguar Land Rover.'

While similar packages have been announced in Europe, the deal remains subject to approval by the European Commission (EC) under new temporary state aid guidelines announced in December. These measures were introduced as a response to the economic crisis and are intended to provide member states with flexibility in providing financial support to companies.

If granted approval, the government hopes to start work with the EC as soon as possible, however, no date for commencement has yet been confirmed.