Jaguar Land-Rover escapes the trap of state subsidy

The Indian car giant Tata Motors announced on Tuesday that it has secured £175m of private funding for its UK-based luxury car business, Jaguar Land-Rover (JLR). The news means the group will no longer seek up to £800m of state support, a position welcomed by the Business Secretary, Lord Mandelson, who was determined to limit any burden to the taxpayer.

JLR has been struggling in the recession, which was a blow to Tata as it only bought the brands from the beleaguered US giant Ford Motor Company in a $2.3bn (then around £1.15bn) deal last year.

The breakthrough will be a relief to Tata Motors, which had been involved in tortuous negotiations since first approaching the Government for help in September. Ratan Tata, the chairman of the Tata Group, hinted at his frustration when he described the talks as "protracted" in a letter last month to Lord Mandelson. Several analysts have described this as "an understatement", as the parties essentially ended up in a stand-off.

Tata insiders believed they had a right to secure state aid, following precedents set elsewhere in Western Europe. The French government has granted €3bn (£2.6bn) of loans to both Renault and PSA Peugeot to ensure their survival. JLR is a major employer in the UK, with the bulk of its 15,000 workforce based here.

As well as seeking capital in the short term, Tata Motors has been in talks with the European Investment Bank about a long-term loan of £340m. This is expected to be secured later this summer and is conditional on JLR developing environment-friendly technologies.

The balance of JLR's funding needs is expected to come from bank loans.

The news proved a boon to Tata Motors' share price. Listed on the Bombay Stock Exchange, shares in India's biggest car manufacturer rose 6.5 per cent by close of business on Tuesday and continued to soar during the rest of the week.

Paul Newton, an automotive analyst at IHS Global Insight, says this increase was overdue, as the stock had been undervalued for some time. "People are now looking at the bargains across auto stocks in some quite sound companies such as Tata Motors."

Howard Wheeldon, a senior strategist at broker BGC Partners, adds that there is now a "feel-good factor" about the company.

"JLR is a company that has more than proved its worth and capability at the forefront of the automotive industry – a company that has a future," says Wheeldon. "It has international reach and tremendous recognition that is worthy of support."

However, Tata still has an outstanding $850m of debt from the JLR purchase, which it will have to carry through a still tough market for car manufacturers, and Wheeldon believes that, over and above the 450 reduncancies made earlier this year, more will have to be made. JLR's chief executive, David Smith, admitted last week: "It will continue to be [challenging] for some time to come and we will continue to take further actions to secure the future of the business."

News
peopleFrankie Boyle responds to referendum result in characteristically offensive style
News
news
Life and Style
Couples have been having sex less in 2014, according to a new survey
life
New Articles
i100... with this review
PROMOTED VIDEO
Voices
Holly's review of Peterborough's Pizza Express quickly went viral on social media
Sport
footballTim Sherwood: This might be th match to wake up Manchester City
Arts and Entertainment
musicHow female vocalists are now writing their own hits
New Articles
i100
News
ebooksAn unforgettable anthology of contemporary reportage
News
news
Arts and Entertainment
musicBiographer Hunter Davies has collected nearly a hundred original manuscripts
News
Blahnik says: 'I think I understand the English more than they do themselves'
people
Arts and Entertainment
Michelle Dockery as Lady Mary Crawley in Downton Abbey
TVInside Downton Abbey series 5
Life and Style
The term 'normcore' was given the oxygen of publicity by New York magazine during the autumn/winter shows in Paris in February
fashionWhen is a trend a non-trend? When it's Normcore, since you ask
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Senior BA - Motor and Home Insurance

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Market Risk & Control Manager

Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Head of Audit

To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

Day In a Page

Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam