Tata-owned Jaguar in secret talks with UK for loan

London: Tatas-owned Jaguar Land Rover is in secret talks with the British government for a £1 bn loan, just nine months after the Indian conglomerate bought the luxury car marque, a leading British daily reported on Sunday.

Quoting an unnamed government official familiar with the development, 'The Sunday Times' said British Prime Minister Gordon Brown is studying the request and an answer could be made in the next fortnight.

According to the report, JLR Chief Executive David Smith has made a direct plea to the government for cash. He believes that with help being given to car makers in the continent and in America, Britain has a good case for financial aid.

At the same time, the Society of Motor Manufacturers and Traders, which is representing the interests of the wider British industry, is seeking a state aid of 2-3 billion pounds.

Tatas are looking to the government for a bridging loan to help tide over the next 24 months, a period where the industry will come under further financial pressure and during this time it will be difficult to access funding markets, the report said.

The component suppliers to the automotive industry are also in difficulties, many of them already facing issues with credit insurance.

Tatas paid USD 2.3 billion for JLR and financed the acquisition with a USD three billion (2 billion pounds) bridging loan.

Since then sales of new cars have plunged which has caused big problems with the cash flow needed to service debt payments.

Despite success with its new Jaguar XF sedan model, particularly in America, JLR is facing similar issues.

The group, which employs 15,000 workers in the UK, needs to slow production in order to sell a backlog of vehicles that have already come off the production line, The Sunday Times said, adding, "last year Land Rover produced 230,000 vehicles, while Jaguar made 54,000."

According to the daily, around the world the market for JLR cars has fallen 25 per cent and analysts fear this could further deteriorate. JLR has already cut shifts and production days at Solihull, Halewood and Castle Bromwich.

Under its previous owner, Ford, JLR group was dubbed the English patient.

In total, Ford invested about 3 billion pounds, including the initial purchase price.

The American carmaker added £300 mn to top up the Jaguar and Land Rover pension funds as a condition of the Tata deal, the daily said.

The report claimed Tata may slow the company's development work. The company is working on hybrid power trains, as well as light-weight vehicle architecture to help improve CO2 emissions.