Britain to examine ways to unblock car finance

By Frank Prenesti LONDON, Jan 28 (Reuters) - The British government and car makers are urgently trying to find ways to work around a rule which prevents car financing companies getting direct access to credit from the Bank of England, they said on Wednesday.

British car makers and government officials will meet again on the financing issue this week, said Business Secretary Peter Mandelson, who has been criticised by trades unions and the opposition Conservative Party for not offering more cash in his rescue package on Tuesday.

"The Department for Business, Enterprise and Regulatory Reform (BERR) have already opened exploratory discussions with banks and Trade and Investment Minister Mervyn Davies will be taking this forward," Mandelson said in a statement.

The move came as the two sides discussed the government's 2.3 billion pound ($3.3 billion) package of loan guarantees, designed to rekindle demand as the financial crisis hammers sales in one of Britain's key manufacturing sectors.

The British motor industry is now largely foreign owned, but still employs more than 800,000 people in total.

Also on Wednesday Toyota joined the growing list of auto firms seeking ways to cut costs at its British plants, and the Italian government sat down with manufacturers to discuss possible rescue measures.

Toyota denied reports it was proposing to axe jobs across its 4,600 employee manufacturing operation, but admitted was considering the temporary suspension of workers.

"We are meeting with employee representatives to discuss a range of measures. These include a shortening of the working week and the temporary suspension of employees," a spokesman told Reuters, adding that a decision would be made by March.

Nissan said this month it would cut 1,200 jobs at its Sunderland plant in northeast England while Jaguar Land Rover has announced 450 job cuts.

The Society of Motor Manufacturers and Traders said it was "encouraged" by Mandelson's commitment to get lending moving to boost sales.

"The challenges they have at the moment is that there are some technical issues as to why non-banks cannot access BoE funding," SMMT chief executive Paul Everitt told reporters after the meeting.

Unite union general secretary Derek Simpson called for swifter action to "throw a credit lifeline to manufacturers". "We need the sort of confidence-building measures that will stimulate demand for cars among the public. If no-one is buying cars, it makes it very difficult for a rescue package to work," he said in a statement.

Jaguar Land Rover Chief Executive David Smith said his company saw "long-term benefit" in the government's package. He said the focus now must be on securing quick access to commercial credit for manufacturers; on looking into a mechanism to support short-time working as an alternative to more layoffs and on spurring demand for vehicles and easing consumer credit.

All sides agreed to look at measures being implemented in Europe, including scrappage schemes such as the one in Germany where new car buyers will get 2,500 euros ($3,314) if they junk cars that are at least nine years old.

Source: http://www.guardian.co.uk/business/feedarticle/8331546