Tata’s Jaguar problems

Posted on May 9th, 2009 by Robert Adams | Posted under: Jaguar, Tata Motors

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When Tata Motors acquired Jaguar’s Land Rover, it was a feather in the Indian company’s cap, but questions are now being raised about how it is going to move forward. At stake are 14,500 direct jobs and thousands more which will be indirectly affected if the rescue plan for the revival or Jaguar falls through.

The UK government has refused to guarantee the £340 million EIB loan, offering to underwrite only £175 million and asking Tata to put up 15 per cent upfront. The UK government also wanted Tata to put in £300 to £400 million before asking for loan guarantees, which the company does not want to do, having already invested £900 million when it bought Jaguar from Ford.

The Tata board rejected the deal because the UK government also wanted veto power on the board, its chairman and any redundancy plans. Tata will not brook any interference in its running of Jaguar and is now seeking finance to the tune of £1 billion from the debt market and has authorized its financial adviser, Citigroup, to find bankers willing to lend the money.

However, the cost of financing would be high, but at least there would be no riders as the UK government is putting.