Britain’s biggest carmaker is in talks with Whitehall about a massive taxpayer support package as the coronavirus pandemic continues to wreak havoc across manufacturing industries.
It is understood that Jaguar Land Rover (JLR) has submitted the largest bespoke loan request of the COVID-19 crisis to ministers in recent weeks.
The plea is understood to have been for temporary state funding of well over £1bn, although a JLR spokesman described suggestions that it was as high as £2bn as “inaccurate and speculative”.
This weekend, the company said: ”Jaguar Land Rover [is] constantly in discussion with government on a whole range of matters relating to COVID and we will not discuss details which are confidential and private.”
A source close to JLR confirmed that a loan request had been lodged with the Department for Business, Energy and Industrial Strategy (BEIS) and said it was being considered by ministers.
Last weekend, The Sunday Times reported that the Indian-owned carmaker was among the companies in which taxpayers could ultimately take an equity stake as part of an extension of efforts to prevent key sectors of the economy collapsing.
JLR, a subsidiary of Tata Motors, is a giant of British industry, employing approximately 38,000 people.
Approximately 20,000 of its employees have been furloughed under the government’s emergency wage subsidy programme, according to a spokesman, although about 2000 employees at the Solihull site returned to work this week.
Its cash position has been made far less robust by the pandemic, with the ratings agency Standard & Poor estimating recently that the company was burning through £1bn every month.
In April, it said total retail sales for the fourth quarter, ending 31 March, had slumped by almost 31% to 110,000 vehicles as a result of the pandemic.
JLR added that it had ended the financial year with cash and investments of £3.6bn, while it also had undrawn bank facilities of £1.9bn.
It was unclear this weekend how those figures had changed in the seven weeks since then.
Last summer, the company secured £500m of government-guaranteed loans in a deal with UK Export Finance.
That came just weeks after it reported a £3.6bn annual loss.
Whitehall’s position on JLR’s latest loan request was unclear this weekend, although it is unlikely that ministers would allow a company as vital to the UK’s manufacturing capability as vital as JLR to collapse.
The fact that JLR is owned by Tata, the wealthy Indian conglomerate, may complicate matters, however.
Tata Steel’s UK operations have made a separate request for a £500m loan from taxpayers, while other companies seeking bespoke support packages include McLaren, Petroineos and Virgin Atlantic Airways.
In each case, company sources say the government has applied pressure on them to exhaust private funding resources before any money would be made available from taxpayers.
Any state support might therefore need JLR’s shareholder to inject new funding alongside it.
A BEIS spokesman said: “The Government is in regular contact with the car manufacturing sector to assist them through this crisis.
“We recognise the challenges facing the industry as a result of coronavirus and firms can draw upon the unprecedented package of measures, including schemes to raise capital, flexibilities with tax bills, and financial support for employees.”
Given the rate at which it is exhausting its cash reserves, the expansion this week of the Treasury’s Coronavirus Large Business Interruption Loan Scheme is unlikely to provide much assistance to JLR.
Under the revamped scheme, companies can access state-guaranteed loans of up to £200m.
The Covid Corporate Financing Facility, a commercial paper programme administered by the Bank of England, is likely to be inaccessible to JLR because of its junk credit rating.
JLR announced earlier this year that Ralf Speth, its long-serving chief executive, would step down in September, although it is conceivable that he will remain in the role for longer to help deal with the crisis facing the automotive industry.
As part of its efforts to conserve cash, JLR will prioritise making models such as Range Rovers and Land Rover Defenders in the coming months.
It has told suppliers that spending on other programmes, such as a new electric saloon and revamps of its XE and XF models, will be put on hold.
Severe pain is already being felt in the supply chains of major car manufacturers, with Arlington Industries – whose customers include JLR – calling in administrators earlier this month.
Other UK-based suppliers to JLR also say they have faced payment delays and have been warned on further potential cutbacks.
JLR is by no means the only large car manufacturer which has been hit hard by the coronavirus outbreak.
Figures published earlier this month showed UK car sales fell in April to their lowest level since 1946.
Of the 4,321 new cars registered last month, most were fleet orders registered prior to the coronavirus crisis.
