Tata group, UK govt talks fail on rescue package for JLR, steel plant

The Tata group has ended talks with the British government for financial rescue packages for Jaguar Land Rover and its UK-based steel plant. The financial metrics of both companies were impacted due to coronavirus pandemic and before that a sluggish economy due to Britain’s exit from the European Union.

The British government was of the opinion that the Tata group has deep pockets and will not require a rescue package at the cost of British tax payers, the FT reported on Saturday. The stiff conditions of the package which sought JLR to reduce production of diesel vehicles and increase production of electric cars was another deal breaker. JLR had sought a bailout package of one billion pounds.

The Tatas are struggling with both steel and car plants in the UK which are making huge losses. JLR alone has lost 1 billion pounds in the first six months of calendar 2020. Tata Steel employs 6,000 people in UK while JLR employs around 30,000. JLR failed to get any package from the Bank of England’s finance scheme due to its poor credit rating. JLR, UK.’s biggest carmaker said a year and a half ago that it will slash 4,500 jobs worldwide as it struggled with a sales slowdown caused by uncertainty around Brexit, flagging demand for diesel vehicles and a downturn in China. Tata has since said it’s open to finding partners for JLR to share the burden of investing in electric vehicles. JLR has also moved production of the Land Rover Discovery, a SUV, to Slovakia from Solihull in Birmingham, England, to make room for future electric cars which will lead to 1,200 job loss in UK.
 

The Tata group will now have to look for alternate source of funding for both companies including getting new investors.

On Tata Steel, analysts said higher steel prices will benefit exports and realisation of European operations, which saw 12 per cent decline in volumes. This, along with severe oversupply impacted product-mix and realisations resulting in an operating loss of Rs 626 crore in the June quarter.

The company is trying continuous improvement from the transformation programme, careful cost management and received wage support from the European and UK governments. As it failed to get UK government’s bailout, it will have to either sell the plant and exit completely or look for investors.