Howad Wheeldon brings Mandelson to account over the on-going JLR loan issue...
I am indebted to the Birmingham Post last week for the following, taken from a letter dated July 16th 2009 from Business Secretary, Lord Mandelson to Ratan Tata, chairman of Tata Motors:
“As we discussed, I am concerned at the lack of pace on the Tata side in considering negotiations on possible UK government support to Jaguar Land Rover”.
I should go on to list other embarrassing innuendo contained in the no doubt deliberately ‘leaked’ Mandelson letter but I will save you further frustration, preferring in this case to leave it to your imagination! Clearly the somewhat ridiculous and unnecessary letter and what subsequently followed was an attempt by the government to shift the pressure of blame for delay in sorting the Jaguar Land Rover EIB loan guarantee request away from government and back to Tata Motors management. Note though, that the sudden burst of enthusiasm on the part of Mandelson and the government team came directly following criticism from other MPs. Indeed, it is quite possible that the leaking of this letter to the Coventry Evening Telegraph last week may have been primarily aimed at JLR workers and Midlands based electoral votes hoping to convince them that it was Tata that was holding up agreement rather than Lord Mandelson.
If so, what rubbish this is and how typical of this particular government!
Whatever, I am left in no doubt that this latest attempt by Mandelson and his team to walk away from the heavy responsibility they have to JLR and its workforce in attempting to sort out what is essentially a simple exercise that comes at no cost and very minimal risks to British taxpayers has completely failed in its objective.
Reading through the leaked government letter and being well aware that it is the British government that has completely failed to get its act together on the JLR guarantee support issue debate, and noting too the likely inevitable destruction of trust from a Tata management perspective, one concludes that these latest bully boy tactics are nothing short of a second insult and humiliation to the Indian based company that bought JLR last year.
The letter was in fact a follow up to what BIS would have us believe was a revised second offer to the company in response to request for UK government assistance in the form of guarantees that had its origins no less than ten months ago. As a response to the Tata request for the British government to guarantee a £340m European Investment Bank, it probably reads very much the same as the first, although it is just possible that it did move the matter on a touch.
For instance, the original offer made in May was a take it or leave it approach to Tata that made unacceptable commercial demands on JLR, provided little more than half the requested loan support guarantee that had been requested and came at an unacceptably high cost to Tata. True, Mandelson had it appears dropped demands that the government would appoint a chairman of JLR, although I understand it retained most restrictions on management’s right to act in a free and unhindered manner.
If not for the fact that I have been led to believe subsequent negotiations have now possibly changed more of the original onerous terms, I would have concluded that the second government offer did add up to just a carbon copy of the original.
However, even if subsequent negotiations have made some progress, please don’t run away with the idea that the British government has changed its mind in being prepared to guarantee more that the £175m contained in the original offer, against the requested £340m, agreed by the EIB.
I can of course confirm none of this but I am led to believe that the timing limit of any proposed government guarantee is set to remain at just six months. However I concede that is just possible that the ridiculous 15% up-front charge has been dropped.
Meanwhile talks continue and a negotiated settlement in this embarrassing and unnecessary situation could emerge soon. I certainly hope so but for now I am left to conclude that the underhand manner in which the government has so far sought to bring this matter to a solution could have been avoided by using just a little more common sense. I, like others, can only be appalled that Lord Mandelson has in effect done nothing less than put two fingers up to Tata Motors, to Jaguar Land Rover management, and to the thousands of workers and staff of this hugely important British manufacturing group. It is a message that to me suggests that the government considers this great company is no longer deserving of support that would allow it to invest in the future for the benefit of the wider UK economy and to invest in British jobs. There are, if the government has its way, to be no winners.
As they say though, every cloud has a silver lining. In this case we can be thankful that Lord Mandelson will likely only be around in government for a few more months whilst both Tata and Jaguar Land Rover will be around for many years yet!
That Lord Mandelson has also had the cheek to go on television last week calling on Tata to quicken the pace of talks has not escaped my notice. Bad enough though this was, far worse was the fact that, together with the leaked letter, he effectively breached an agreement with Tata Motors to negotiate in private. The leaking of this letter needs to be explained and will clearly have further dented trust between Tata and the British government – leaving Mandelson’s request to speed up talks looking rather absurd. However, whilst the official line of government is to push the onus for delay onto Tata and to suggest in public that the government has a duty to protect taxpayers, I am increasingly of the view that beneath the surface there is now a softening of the government position. Given the criticism this does not surprise me. We will see, but I am reliably told that the government is now seeking that the JLR issue should be resolved quickly and that while intending to retain some broad principles of the original offer we should expect larger sticking points to soon be removed. My guess is that given removal of the most onerous and unacceptable of the original terms, Tata Motors would likely then accept a better-than-nothing deal with the British government – maybe and hopefully over the next ten to fifteen days.
By Howard Wheeldon of BGC Brokers
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