Car industry bosses gathered in London yesterday to find out how to access the £2.3bn automotive assistance package launched by the Government in January.
The scheme, launched by Lord Mandelson, the Business Secretary, was only cleared by European state aid watchdogs at the beginning of this month, and until today the specifics about how the loan guarantee scheme will work in practice were not clear, so no companies could take advantage of it.
The package covers £1.3bn of European Investment Bank lending and a further £1bn from "other sources" such as high street banks. Eligibility is tied to low-carbon goals, and companies throughout the supply chain can apply for the Government to underwrite up to 75 per cent of the total loan. With putative acceptance from a lender, companies can approach the Government for the guarantee. The minimum value is £5m, and applications will be assessed on a case-by-case basis against environmental and financial criteria before being passed to the Treasury.
Ian Pearson, the Business minister, said: "The programme is now open for business. We are determined that this scheme delivers support as quickly as possible. The Government has put the scheme in place, and has now clearly set out the criteria against which applications will be judged. Now it's up to companies to come forward with their bids."
The Government has faced criticism for launching a supposed rescue package which then took more than a month to clear with Brussels and another 10 days to clarify in detail. In the meantime, the car industry is being decimated by collapsing consumer demand and restricted access to finance. Thousands of jobs have already been lost as major manufacturers cut production and slash costs, and yesterday Toyota became the second big group to do a pay reduction deal with staff to try to avoid redundancies.
Even with the government loan guarantees up and running, the sector's acute problems are little improved, say critics. A source at a major manufacturer said: "This is some encouragement, but there is still the prime issue of getting credit moving. We are now almost in the middle of the biggest sales month of the year and we still need the freeing up of access to credit for suppliers, dealers and consumers. The industry has been calling for this for months."
The Society for Motor Manufacturers and Traders (SMMT) has been in talks with the Government since the start of the year about how to boost liquidity. Proposals for car makers' finance arms to be able to access the credit guarantee scheme set up for the ailing financial sector by the Bank of England have been rejected. Instead, the car industry is to be included in the Bank's £75bn asset purchase facility, under which they can sell portions of their loan books to the Bank as asset-backed securities. In the last week some companies have approached the Bank on the issue for the first time, but progress is glacial.
Similarly, calls for a scrappage incentive to boost demand, and short-time working wage support to avoid redundancies and the loss of vital skills, are not actually rejected, but nor are they agreed. Paul Everitt, the chief executive of the SMMT, said: "The frustration is that on one level all these things are still live, but we don't appear to be much closer to a satisfactory resolution, and meanwhile the sector continues to suffer." The problem is that the car industry is low on the Chancellor of the Exchequer's priority list. "Saving the banks is still much higher up the agenda," Mr Everitt said. "The approach is more about how can we use these various schemes to support the financial sector, than about how to support a strategically important sector which is unquestionably having the most difficult period it has ever faced."Reuse content