England Finally Offers Bailout Money to Its Auto Manufacturers

By Brendan Moore

01.28.2009

After a combination of begging and cajoling from Vauxhall, Jaguar and Land Rover over the past 90 days, the British government finally announced they were making £2.3 billion ($3.2 billion USD) available to the British auto industry.

The money is coming in the form of loans, not outright grants, but it still represents a very positive development for the car companies. The auto industry in Britain registered record low sales in December 2008 – the worst drop in sales in twenty years.

Of course, just like in the US, there was a lot of political back-and-forth before the aid happened – the Conservative party (currently the party not in power in England) lambasted the government for “too little, too late” regarding its efforts to help the auto industry. They claimed government officials hesitated too long before deciding to offer the auto industry assistance, putting valuable British jobs in mortal danger.

Besides the US auto bailout, other European governments have already set up a tab at the bar for their national automakers. France has guaranteed a large credit line of up to €6 billion ($7.9 billion USD) to PSA Peugeot Citroen and Renault SA together, as long as the jobs are kept. Opel has gotten a commitment of €1.8 billion from Germany’s federal government.

It’s worth noting, however, that there is some ambivalence among the British themselves about bailing out automakers, since every car company of any meaningful size is foreign-owned. There is also the bad cultural hangover of the massive amounts of government aid given to now-gone British car companies in the Seventies and Eighties, which, in retrospect, was money flushed down the toilet.

But, that aside, the government made its decision, and is now moving forward with the aid.

What the auto industry in England wants most is easier access to auto loans to encourage now-abesent motorists back into the showrooms and state-backed loans or short-term funding to subsidize layoffs. They feel they can make it through this bad patch with that help.

The British auto industry is responsible for 850,000 jobs in-country and produced 1.65 million cars last year. Three-quarters of those vehicles are exported, making the auto sector quite valuable to the country in terms of trade surplus/deficit calculations.

COPYRIGHT Autosavant – All Rights Reserved

Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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