Government dismisses aid for van factory

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The Independent Online

The Government tonight appeared to rule out a plea for financial aid to secure the future of a van factory, raising the prospect of its closure with the loss of thousands of jobs.

The LDV plant in Birmingham, which has not produced any vehicles for more than two months following a global downturn in sales, was said to be "literally running out of cash" as the owners asked for a multi million pound bridging loan.

The firm, owned by Russian giant Gaz, announced that a management buy-out aimed at transforming the manufacturer into Europe's first "green" van firm was nearing completion.

The plan, led by outgoing Gaz chairman Erik Eberhardson, would make the firm the first volume producer of electric vans in the UK, but is dependent on a bridging loan of between £20 million and £30 million.

The Business Department said tonight: "We have written to LDV and reiterated our view that the primary responsibility for supporting LDV and the management buy-out rests with Gaz, but in the absence of such support from Gaz, we cannot see a case for further assistance from the Government."

A spokesman said the firm had been given a previous loan of £24 million which had not been repaid, adding: "We are helping and will continue to offer support and advice as LDV continues discussions with Gaz and others on the future of the company."

The plant, in the Washwood Heath district of Birmingham, employs 850 workers and has a dealer network employing a further 1,200, with thousands more employed in firms which supply LDV.

Mr Eberhardson responded to the Government announcement by saying: "We want to explore every avenue possible to save the company and the jobs.

"We still think that the company has a strong potential future as an electric van manufacturer, and the new ownership team, which is separate from Gaz, is prepared to invest its resources in that new venture if the Government is able to give a short-term loan.

"We are ready to sit down and talk with the Government at any stage about what commitments each party is able to put in. We hope the Government will accept our invitation to do so."

The Business Department said it was down to the parent company to put up the funding to secure its future as a management buy-out.

"The company has an existing bid in for a loan from the European Investment Bank for future product development which we are supporting. We would continue to support an application by an LDV management buy-out.

"The British taxpayer cannot be expected to pay for the company's losses in the absence of the owners assuming their responsibilities."

But Derek Simpson, joint leader of Unite, said: "The answer to the question why should the Government be expected to cover past debts has to be, are they joking?

"Billions of pounds of taxpayers' money have gone to the banks to plug their horrific debts yet the Government is stalling on finding a fraction of this to keep a viable company operating.

"This company is not asking for a bail-out but for a short-term commercial loan to assist it while it secures alternative funding. It would be a sensible use of public money to support this company and keep some 6,000 workers in their jobs into the bargain.

"This delay in resolving the serious difficulties our manufacturing companies face cannot be allowed to become the norm.

"Government must move urgently towards establishing a comprehensive package of support for the sector, together with a clear process for accessing the support and immediate moves to introduce short-time working, just as our competitors in Europe have done.

"The priority must be to keep people in their jobs, in position ready for when the upturn comes, and to retain the fabric of our manufacturing sector which holds the key to our future economic revival."

A spokesman for LDV said there could be no doubt about Gaz's commitment to the firm, adding: "It has injected around 120 million dollars (£82m) of capital into the company.

"Gaz and Erik Eberhardson are prepared to support a successful management buy-out with a further injection of around £3-4 million of fresh capital.

"But for a management buy-out to work it also needs the short term support of the government. This would certainly not be to fund past losses, which have already been assumed by Gaz.

"Instead, it would be to provide a short-term loan to allow the company to be reborn as a producer of electric vans."

Mr Eberhardson told BBC Radio 4's Today programme: "Unfortunately since the company is not producing, it is not making enough revenue to cover its costs. It is literally running out of cash as we speak."

He said Gaz could not support LDV "going forward", but the management buy-out and plans to manufacture "green" vans would transform the company.

It is understood that no talks were held between the company and the Business Department today and none are scheduled for tomorrow despite warnings that the factory could close by the end of the week.

Gaz is owned by Russian oligarch Oleg Deripaska, who hit the headlines when he hosted Business Secretary Lord Mandelson on his yacht in Corfu.