David Prosser: Don't leave Jaguar stuck on the hard shoulder

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The Independent Online

Outlook: A number of readers have been in touch expressing scepticism about my argument in this column yesterday that Britain's car manufacturing sector is a special case worthy of state intervention. The theme which united their comments was that while the collapse of a bank is a systemic risk that must be managed, a troubled car-maker is no different to any other troubled company.

It is a valid argument, but one point I didn't make yesterday was that Jaguar Land Rover isn't atroubled company, at least not in the same way as, say, Woolworth's.Without wishing to add to the misery of those caught up in the collapse of Woolies, there's no denying that this was a company in difficulties well before the credit crunch or the recession.

The sudden and dramatic onset of the downturn was the final nail in Woolworth's coffin, but, sadly, the retailer has been on the skids for many years. It is difficult to imagine it would have survived much longer even without the disastrous trading period of the past few months.

Jaguar Land Rover, on the other hand, was performing well until very recently. This is a company that made a £327m operating profit in 2007, and £310m in the first half of 2008. Its problem now is a lack of credit from banks tightening their lending criteria rather than a lack of a viable business plan for the future.

Indeed, if the Government can be persuaded to offer sufficient short-term loans to get Jaguar through the worst of the recession, there's every reason to think the state might get a decent return on its money. Plus the prospect of investment in environmental technology and a highly skilled workforce – both at the car manufacturer itself and within associated industries.

The same, unfortunately, cannot be said of many other businesses now going to the wall.

The challenge for policymakers lies in working out which companies are now worthy of state support and which ones would have ended up in difficulties, sooner or later, without the impetus of the downturn.

To put it another way, car manufacturing really is a special case. There may, of course, be others, but not every business in trouble can, or should, be rescued.

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