Cable calls time on state backing for car industry

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The Independent Online

The car industry in the UK can no longer rely on direct state support, the Business Secretary warned yesterday, adding that the sector was no longer facing the crisis that threatened to cripple it a year ago.

Vince Cable used a visit to Burnaston, Derbyshire, where Toyota was launching its new hybrid car, the Auris, to warn that the Government would no longer provide blank cheques for the car industry.

MrCable, the former Liberal Democrat Treasury spokesman, said that aid in the future would be focused on areas such as greater deregulation, tax reform and additional training grants for apprenticeships.

The Business Secretary also suggested that any bid for support from General Motors (GM), for the development of its planned Ampera electric car, which the company is planning to build at its Ellesmere Port plant in Merseyside, was likely to be rejected.

The company, which last year asked forhelp from a number of governments in the form of loan guarantees to support its flagging European business, hasnotyet asked the new Government for help.

Aspokeswoman for the Department for Business, Innovation and Skills yesterday refused to categorically rule out state aid for GM, but stressed that help for the car industry would be “more intelligent in the future”.

MrCable said that while the Ampera project was attractive, he stressed that such projects “should not depend on Government support”.

The new administration is thought to consider specific support for the car industry, which was approved by Mr Cable’s predecessor, Lord Mandelson, as too expensive and contradictory to its policy of reducing the budget deficit and public spending.

Earlier this month, the Government did approve a loan guarantee for Ford and a grant for Japanese carmaker Nissan. Both deals had been agreed with the previous Labour government.

Mr Cable’s comments will worry those in the car industry, which has only recently begun to report better trading conditions after a miserable 2009. A number of economists, not least those in the new Office for Budget Responsibility, have predicted lower growth than had previously been estimated, and an uptick in the unemployment figures, which would put pressure on the fragile industry. However, MrCable was adamant yesterday that the car industry will beweaned off the safety net of government backing.

General Motors, which makes Vauxhall cars in the UK and the Opel marque in Europe, did not return calls yesterday, but in recent weeks it has signalled that it is in better shape than a year ago, when its US parent company filed for Chapter 11 bankruptcy protection and moved to sell its European operations.

It later decided against a sale, despite asking for support in the form of loan guarantees worth €1.8bn (£1.45bn), from the British, German, Spanish, Polish, Austrian and Belgian governments.

Earlier this month, the group withdrew its request for the guarantees to help it raise crucial financing from the debt markets.

GM’s poor credit rating would have meant that borrowing the money without public sector support would have been prohibitively expensive. When GMwithdrew the request it hinted that it had become frustrated by the slow progress of the discussions with a number of administrations.

Themove came just a week after the German government refused to back €1.1bn of loans, arguing that the company’s fortunes had improved sufficiently in recent months to render such a guarantee unnecessary.