Ministers’ claims to have helped JLR in doubt as £1.5bn support left untouched
Jaguar Land Rover has not drawn down any of a £1.5bn loan facility guaranteed by the government, with suppliers expressing anger over ministers’ claims to have supported the carmaker’s supply chain after a crippling hack.Britain’s biggest automotive employer was forced to shut down all of its wholly owned factories from 1 September for more than a month, after cyber-attackers compromised key computer systems.Liam Byrne, the Labour MP who heads of parliament’s business select committee, on Friday wrote to the business secretary, Peter Kyle, asking for clarification as to whether any money had reached JLR, and if the aid was requested by the carmaker.Suppliers to JLR have privately expressed anger about the government’s messaging, which appeared to take credit for helping them.
An executive at one parts maker said: “In some ways the government played a blinder with everyone thinking they bailed out JLR.They did nothing.”JLR was able to restart limited production only in early October.It has since been focusing on ramping up output, with a full rate of production expected by early December.The shutdown caused chaos in the UK automotive industry, which was already under pressure after an extended period of low demand.
Suppliers laid off thousands of workers to save cash, and this month the Guardian revealed JLR’s plan to pay upfront for parts in order to get money into the supply chain quickly after a month without orders,JLR is on track to avoid the worst-case scenario of a shutdown lasting into the new year,However, the Confederation of British Metalforming (CBM), a lobby group representing many of the company’s suppliers, said financial support to parts makers still needed to be accelerated,Most suppliers work on 60-day payment terms, meaning some will start to feel the worst of the financial pressure next week, two months after the attack halted orders,The crisis prompted calls by MPs for government intervention, before the Labour party conference at the end of September.
The evening before the conference, Kyle announced that government-controlled UK Export Finance (UKEF) would guarantee a £1.5bn loan, in effect promising to cover 80% of the debt if JLR were to default.The size of the guarantee was “outside of UKEF’s normal risk appetite”, its chief executive warned the business secretary.Announcing the loan guarantee, Kyle said it had “the explicit intention that that is to support the supply chain into JLR as well”.In its announcement the government said it would “bolster JLR’s cash reserves so it can support its supply chain which has been greatly impacted by the shutdown”.
In his conference speech two days later, Kyle trumpeted the government’s intervention.He said: “I’ve announced £1.5bn support – a huge amount of money to help a hugely important company.”The Financial Times reported that JLR only formally agreed the loan covered by UKEF this month, with HSBC, Mitsubishi UFJ Group and NatWest acting as potential lenders.Several sources told the Guardian that none of that loan facility had gone into JLR’s accounts, nor had any gone to any of its suppliers.
Instead, the carmaker used its existing large cash reserves for its scheme to help suppliers,The ability to access a loan readily, even if not used, may have helped JLR marginally by lowering the risk of it breaching other banking agreements,However, the loan guarantee is unlikely to have helped suppliers,Sign up to Business TodayGet set for the working day – we'll point you to all the business news and analysis you need every morningafter newsletter promotionA government spokesperson said: “We acted quickly and decisively to put support in place for JLR through a loan guarantee at a critical moment to help the company and its supply chain stabilise the situation,“We continue to work closely with JLR, the industry and major banks to keep a close eye on the supply chain through this challenging period.
”Even after JLR’s own support scheme – which received no help from the government – some suppliers have raised concerns that it is taking some time for payments to trickle down through the “tiers” of the supply chain.While tier 1 suppliers have generally received cash from JLR’s scheme, the carmaker is reliant on them to keep making payments to the lower tiers.Byrne, a Labour MP in a Birmingham constituency that is home to many JLR workers, also asked for more information on how the government was monitoring whether adequate support was going beyond the first tier, and why the government thought a loan guarantee was the best option to help the supply chain.Stephen Morley, the president of the CBM, said some parts makers had received much-needed cashflow but others further down the chain would start feeling the worst of the squeeze imminently, two months after their last invoices became due.“From 1 September, no matter when you get paid, there’s no sales to invoice,” Morley said.
“Depending on your payment terms, come 1 November the majority of invoices would have been due.This is a critical pinch point as there is nothing to invoice.”However, he added that the recovery was going better than expected overall.He said: “JLR has done well so far, but there’s work to do.”
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