Tata Motors rejects Jaguar Land Rover loan guarantee terms

07 May 2009

Tata Motors is reported to have rejected a UK government guarantee that has sought a 15 per cent commission on a 340 million pound ($514 million) loan offered by the European Investment Bank to the troubled British carmaker Jaguar Land Rover.

In addition to the 15 per cent commission, the government has sought veto power on the company's board as also over its chairman and a say in any future redundancy plans, the Sky News reported today.

The board of Tata Motors, the parent group of Jaguar Land Rover, has vetoed the deal, the report said, adding the total rescue package involved loans of nearly 800 million pounds - 340 million pounds from the European Investment Bank and another 450 million pounds from British banks - both underwritten by the government.

The UK government, however, denied the deal is close to collapse and said talks were still continuing with the firm. The government, in fact, said it's more interested in revival of the carmaker due to its strong environmental policies.

A failure of the rescue plan puts at risk the 14,500 jobs directly and thousands more among component suppliers.

These government departments are against guaranteeing the £340 million EIB loan. They would rather underwrite only £175 million of the loan, for which Tata must pay 15 per cent up front.