Rolls seeks DTI backing for new range of cars

VICKERS, the engineering conglomerate, has asked the Government for launch aid to help fund the development of a new Rolls-Royce model.

It is understood that the original request for launch aid was made about a year ago, but discussions on the subject have recently been renewed.

Sir Colin Chandler, chief executive of Vickers, has met Michael Heseltine, President of the Board of Trade, and further meetings with the Department of Trade and Industry have been scheduled.

Rolls-Royce updated its range with the launch in 1991 of the Bentley Continental R and the Rolls-Royce Touring Limousine. But it wants to launch a new model range of both Rolls-Royce and Bentley cars.

Analysts say that without a new range, Rolls risks losing out to competition. It will no longer be able to charge premium prices for its cars.

The cost of developing a new range has been estimated at pounds 200m, although Sir David Plastow, the former chairman, said at last year's shareholders' meeting that the cost had been exaggerated.

Analysts say Vickers would be hard-pressed to fund the development. After a collapse in sales of Rolls-Royce cars Vickers made a loss of pounds 12m before tax last year and is expected to make a larger loss in this financial year.

It recently failed to win a Kuwaiti order for its Challenger 2 tanks, which would have brought with it an up-front payment, easing the group's difficulties.

Vickers' businesses include medical equipment, aerospace engineering and Cosworth engines, as well as tanks and Rolls-Royce cars.

Vickers was encouraged by John Major's new year interview in which he expressed support for manufacturing industry.

The launch aid scheme was set up under the Civil Aviation Act of 1982 since when it has spent pounds 1.58bn on aircraft and aeroengines. Current recipients include British Aerospace for the Airbus A330/340 and Westland for its EH101 helicopter.

Under the scheme, the Government provides large sums of money - the A330/340 has received pounds 240m. Recipients repay the money as a levy on sales. In the current financial year the Government expects to recive pounds 64m, the same as it will pay out.

A DTI spokeswoman said legislation would be required to extend the scheme to the motor industry.