Breaking his silence for the first time against the policy of a foreign government, Tata Group chairman Ratan Tata, who is also the chairman of Jaguar Land Rover warned of ''devastating consequences'' and voiced his disappointment on the UK government's inability to guarantee loans to JLR
Speaking to Sky News and Birmingham Post after launching the Tata Nano, Tata said that the UK government should understand that JLR was seeking a loan from the government for working capital as UK banks have stopped lending, and not a bailout.
"If the attitude is to see who blinks first, then the damage is going to be quite devastating," Tata said and added, "What we have asked for is not a bailout. What we have asked for is help from the government to facilitate commercial loans, because the banking system has come to a halt."
With the company spending £400 million a year on research and development or around a third of the UK's total annual investment in automotive R&D, in one of the most modern auto research facilities in the UK, Tata said that without government guarantees, the research and development programmes will and will have a knock-on effect in the future.
He warned, ''If funds are not available, a company will not be able to run. So lay-offs will take place, redundancies will take place or, in some cases, as has already happened in the UK, not with us, plants have been closed.''
Responding to criticism in the UK for seeking funds from the UK government instead of dipping into his own group coffers to tide through the crisis, Tata said ''Since acquisition we've either loaned or converted to equity Jaguar Land Rover's $1 billion over and above the acquisition and if the British government's view is that we liquidate the rest of Tata to resurrect JLR, I think that's unrealistic.'' (See: Tatas to inject funds into Jaguar Land Rover)
The UK government had announced in late January the long awaited package to support the country's car industry with £2.3-billion loan guarantees comprising £1.3 billion in loans from the European Investment Bank and a further £1 billion loan from the UK Treasury to fund the development of more eco-friendly cars. (See: Britain unveils £2.3 billion loan for car industry)
But immediately after the UK government announced this package, the auto unions, who had been expecting £13 billion, expressed shock and said that the package was woefully inadequate, with industry experts calling it "a damp squib" as it had a ceiling of £250 million per manufacturer with the bottom of the range starting from just £5 million for each car manufacturer.
Even these loans have not been forthcoming till date due to the tardy and lengthy procedures of the European Investment Bank, which confirmed through its website that JLR had applied for £281million in loans.
Tata is seeking £500 million from the UK government on an urgent basis and told Birmingham Post, ''If people say that we bought JLR and it's up to us to fix it, I say where do we go for the fix? There is no credit available from the banks. It's simply not there.''
''For some reason, our interaction with the government and members of the government seem to come back to, Tata is seeking a bailout.''
Venting his frustration, Tata added ''JLR is facing a global turndown in demand and that's not something we're able to fix from here. This is the first time we have ever sought government intervention or assistance in our lives, so it would be unfair to say that 'Tata should fix it' and we have in fact done a great deal to try and fix it, but we just don't know where to turn.''
JLR along with other UK car manufacturers was seeking government help prior to Christmas and the government seemed frozen in indecision on the issue (See: British government may outline rescue package for car industry). The and the Department for Business reacted to Tata's statement by saying that the responsibility of running the day-to-day business lies with the parent company although it is still in talks with JLR about it long-term plans on restructuring.
In order to have liquid funds, the Society of Motor Manufacturers and Traders (SMMT) was trying to get the Bank of England's £75 billion asset purchase facility for the finance arms of car manufacturers for their day-to-day credit workings, but this also not materialised.
After unveiling the £2.3-billion bailout to the auto industry, Lord Mandelson had admitted that the amount was insufficient and early this month lashed out at the government for taking so long to release those funds.
Member of the European Parliament and former car executive, Malcolm Harbour said that Tata's criticisms of the UK government was in line with what opposition politicians and other company executives had been saying all along and he hoped that the Tata being a major player in the world automotive business, the UK government would take note of what he was saying.
Inearly March, JLR employees voted an overwhelming 70 per cent to back proposals recommended by their unions, Unite and the GMB, which would see the working week reduced to four days and pay frozen for one year in lieu of avoiding compulsory redundancies in the non-management workforce in the UK over the next two years.