UK may finally lend money to Tata Motors for reviving JLR

After eight months of intensive negotiations that semd to be going nowhere, the UK government may finally underwrite a £170-million loan to Tata Motors' UK subsidiary, Jaguar Land Rover, although it is too early to predict the final fate of the now-on now-off loan deal. (See: Tata's Jaguar-Land Rover may get UK bailout after all)

After being criticised by the UK Parliament's Business and Enterprise committee for not having concluded the loan negotiations with JLR last month, (See: Mandelson's brinkmanship with Tatas hurts JLR loan guarantees) the government is reported to have toned down substantially the terms it had put earlier for passing the loan.

On Friday, executives from Tata Motors, JLR and officials from Lord Mandelson's department met to iron out details of the loan. The UK government is reported to have removed the contentions clauses, which made the carmaker reject the loan in May. (See: Tata Motors rejects Jaguar Land Rover loan guarantee terms)

The original clauses put by the government for approving the loan like the power to veto the company's board and a say in any future redundancy plans have now been dropped.

The government is now reported to have agreed to guarantee an £175-million loan for JLR's working capital from the £2.3-billion loan package it had announced in January, (See: Britain unveils £2.3-billion loan for car industry) making JLR the first carmaker in the UK to receive any financial assistance from this package. 

The £175-million loan, however, would be backed, in turn, by commercial guarantees provided by banks to Tata Motors ostensibly to prevent jeopardising the UK taxpayer's money.