Tata gets private-sector loan, doesn't need UK government money
Tata's target was £1 billion ($1.65B U.S.) in loans to keep the JLR group going. And while Tata is in talks with the U.K government about providing a large chunk of that, some of the government's terms -- like veto power over management decisions-- prevented Tata from pulling the trigger.
A measure of success has been achieved with the announcement that Tata has secured a £175 million ($289M U.S.) loan from private sources. Those funds mean that Tata doesn't need the government's money. It also means short cuts won't need to be taken during the current launch of the new XJ and launch of the facelifted Rovers later this year.
[Source: Automotive News - Sub. Req.]
Get a WordPress.com Blog
Reader Comments (Page 1 of 1)
AC0 9:49AM (8/13/2009)
I think the most important thing for Land Rover is to ensure a safe passage for the LRX to market. That will keep them above the water till the next boom comes, when everyone will quickly forget about the current recession, and the need to appear socially conscious. At that point, the RR Sport can resume its position as the relatively good cash cow it has been for them. It's wasteful image is hampered by the fact that it carries the negative connotations of the proper Range Rover, without the countryside pretensions.
However, as volatile as social trends are, the environmental movement is more consistent. It will be interesting to see what they do to adapt; facelifts aren't always going to cut it. I love the Range Rover and plans for the LRX, but loathe the Sport, so for the sake of the first two I hope all three can find a way to stay relevant. I think the best way for them to bolster their image is to consider lifetime costs rather than MPG figures. Move to using only recycled plastics. Use reclaimed woods in the interior trim, etc. etc. It's always surprising how mundane materials can find a new sheen when treated with some environmental rhetoric, and yet it is actually a useful contribution to the environment - taking away rather than adding features like hybrid technology, which are nothing more than pointless window-dressing on a car like this.
Funneling public money into private institutions (particularly a foreign one, regardless of the fact that the foregin company is propping up a domestic legacy) is not very popular at the moment following the banking saga, so i think it's good for Tata to have found a solution without needing to rely on the goverment. Not to mention, cars from a car company built around cost-cuts are never quite as sought after as those that have seemingly had no expense spared.
Reply
oliver 9:51AM (8/13/2009)
"A Peculiar People"
Reply
Bloke 6:45PM (8/13/2009)
"Funneling public money into private institutions (particularly a foreign one, regardless of the fact that the foregin company is propping up a domestic legacy)"
Jaguar Cars Ltd and Land Rover Ltd are not foreign entities. They are companies domiciled and articled in England & Wales with privately issued shares. Those shares are simply owned by a foreign parent company.
Any public funding received by Jaguar and LR would remain firmly in those UK-domiciled companies.
It's important you understand how companies (and groups of companies) are structured as entities before making these kinds of remarks.
Reply
AC0 10:09AM (8/13/2009)
I'm well aware of that, but perhaps you would like to point me to an article titled in such a way that suggests it is Jaguar or Land Rover seeking assistance, and not Tata on their behalf? If Tata, the foreign company, is leading the request then it is going to be *seen* as them being the receivers, despite the fact that the money will instead go to the British companies; a fact i pointed out by referring to the "domestic legacies". What the public sees is more important for Tata's image than the accounting reality.
Bloke 6:44PM (8/13/2009)
"I'm well aware of that, but perhaps you would like to point me to an article titled in such a way that suggests it is Jaguar or Land Rover seeking assistance, and not Tata on their behalf?"
This is exactly what I mean when I talk about how companies are structured. The article is misleading because Autoblog don't really understand the mechanics either.
As a parent company, Tata will be concerned about the efficiencies of all of its subsidiaries, because that ultimately affects both cash flow and profitability. UK Government loans would be injected directly into Jaguar and LR's coffers, not that of Tata. However, those loans would incur interest charges which would hit Jaguar and LR's bottom lines - pointless tax relief if there are already accumulated losses built up for UK corporation tax purposes. Also, there would likely be extensive strings attached which may directly affect the efficiences of those subsidiary companies.
If Tata obtains funding itself and injects that money into the subsidiary companies, those subsidiaries still get the required working capital but Tata itself gets the tax relief against Indian corporation tax. In addition, it also has more chance of obtaining tax-relievable management charges to its subsidiaries in the UK with UK tax authorities to slowly recoup that investment without the need for waiting for dividends which can only be paid from accumulated profit. Whatsmore, given Tata's sheer size and balance sheet girth, it could likely obtain very favourable funding privately to achieve the purpose.
Bloke 6:42PM (8/13/2009)
AC0: As a parent company, Tata will be concerned about the efficiencies of all of its subsidiaries, because they affect cash flow and profitability. UK Government loans would be injected directly into Jaguar and LR's coffers, not the parent's. Those loans would incur interest charges which would hit Jaguar and LR's EBITDA - pointless tax relief if there are already accumulated losses built up for UK CT purposes. Also, there would likely be extensive strings attached which may directly affect the efficiences of those subsidiary companies.
If Tata obtains funding itself and injects that money into the subsidiary companies, those subsidiaries still get the required working capital but Tata itself gets the tax relief against Indian corporation tax. In addition, it also has more chance of obtaining tax-relievable management charges to its subsidiaries in the UK to slowly recoup that investment without the need for waiting for dividends which can only be paid from accumulated profit. Whatsmore, given Tata's beef on its balance sheet, it could likely obtain very favourable funding privately to achieve the purpose.
Bloke 6:42PM (8/13/2009)
UK Government loans would be injected directly into Jaguar and LR's coffers, not Tata's. Those loans would incur interest charges which would hit Jaguar and LR's EBITDA - pointless tax relief if there are already accumulated losses built up for UK CT purposes.
If Tata obtains private funding itself and injects that money into the subsidiary companies, those subsidiaries still get the required working capital but Tata itself gets the tax relief against Indian corporation tax. In addition, it also has more chance of obtaining tax-relievable management charges to its subsidiaries in the UK to slowly recoup that investment without the need for waiting for dividends which can only be paid from accumulated profit.
Brian 10:01AM (8/13/2009)
Well the USA under Obama is well on its way to becoming a second Great Britain--a once great country turned into a Socialist s***hole by leftist policies.
Reply
Bloke 10:08AM (8/13/2009)
Brian: I'll take socialist policies any day compared to the every-man-for-himself-and-sod-the-rest, debt-inducing system used in the States. I cringe every time I hear Americans chant "united we stand", because there isn't a country in the world more removed from that ideal.
thomasd23220@hotmail.com 10:24AM (8/13/2009)
Your country is pathetic, and you're going the way of the USSR where everyone is employed by government and innovation is strangled by high taxes and high regulation. But don't worry, President Hopey McChangey will do his damndest to get us to look just like Britain and France.
Brian 10:26AM (8/13/2009)
What is Great Britain now? You once had an Empire but now you're irrelevant, being swallowed up by the Socialist EU and massive Muslim immigration.
Bloke 10:35AM (8/13/2009)
Great Britain had the 19th century, the United States had the 20th, but the 21st belongs to China.
Bloke 10:37AM (8/13/2009)
"Your country is pathetic, and you're going the way of the USSR where everyone is employed by government and innovation is strangled by high taxes and high regulation."
I deal with cross-border taxation for a living. You really shouldn't touch on subjects which you clearly have no clue about.
Avinash machado 10:03AM (8/13/2009)
Ford must be glad that they bailed out of these two boat anchors.
Reply
oliver 10:32AM (8/13/2009)
Hope. Change.
Reply
British_Rover 12:04PM (8/13/2009)
Seriously how does a post about cars made in the UK but owned by an Indian company turn into an Obama bashing fest? You people are pathetic.
Reply
Bloke 6:40PM (8/13/2009)
AC0: The accounting reality is important. Interest paid by the subsidiaries with accumulated losses means wasted tax relief; interest paid by the parent is tax relievable, plus given its purpose is likely to obtain greater chance of tax relievable management charges to the subsidiaries as a way of recouping some of the investment without waiting for accumulated reserves to pay itself a dividend.
Reply