It’s not only US Auto companies that are looking for a bail out.
According to this article in the UK Independent, Britain is looking to do a bail out for Jaguar. It looks like the automaker PR playbook has been sent to the UK press:
The luxury car firm employs 15,000 workers in the West Midlands and a further 60,000 other jobs in the region rely indirectly on the firm.
Like the US government, the British government is looking to provide loans to help the auto industry weather the dramatic downturn of vehicle purchases. In Britain’s case, they are looking to loan the equivalent of $1.5B, to Jaguar’s Indian owner Tata.
Like the US’s Chrysler, Jaguar was recently acquired. Unlike Chrysler, Jaguar was acquired by a company who has experience in the automotive industry. In both cases, the fact that they were recently acquired would almost be enough reason to say “caveat emptor” and let them fend for themselves.
Like the situation in the US, the British politicians are trying to weigh the political implications of a bailout:
Ministers are also conscious of several marginal parliamentary seats in the West Midlands. Seven constituencies – including Redditch, held by the Home Secretary, Jacqui Smith – would fall to the Conservatives with a swing of 5 per cent. Another three would be captured by David Cameron if the swing is 10 per cent.
Apparently, economic scale doesn’t work just in global sales. The Jaguar deal at $1.5B amounts to $100,000 for each direct job at Jaguar. In the US, with a price tag of $15B being discussed and approximately 240,000 direct auto jobs, we benefit from the rollback price buying an industry for just $65,000 per direct job.
Of course, our rollback number could change dramatically. If, as some have estimated, the total US bailout comes to $30B, we now pay $130,000 per direct job.
Unlike the US industry, which is not only suffering negative cash flow but with the exception of Ford in 2005, has not seen any profits for the past several years, Jaguar has been profitable:
Jaguar has told ministers it is a healthy and viable business – making a £327m profit last year and a £310m profit in the first half of 2008 – but has asked for help guaranteeing “short-term liquidity” because the major banks are reluctant to lend cash during the downturn.
A bailout by any other name still smells rotten. However, while $1.5B is a lot of money, Jaguar has an existing business plan that works, Jaguar isn’t facing the equivalent of a multiple organ transplant and hoping to accomplish it with a simple appendectomy. With a straight face, Jaguar and the British government, can actually argue that they aren’t providing a bailout but ,rather a loan to allow an otherwise healthy and profitable company, the ability to weather extraordinary times.
If only we were so lucky!
looks like all the high end car companies need to start making more economic, affordable models!