LDV bites the dust

So LDV finally slips into administration this morning after attempts to sell it as a going concern failed over the weekend.

It is estimated that 850 direct jobs as well as 1200 in dealerships and many more indirectly could be lost after negotiation with the Malaysian Company broke down and the government could not be persuaded to loan £60m to secure the firm.

That figure may be less significant as the Birmingham post estimates that closure could

cost the Treasury up to £53 million in unemployment benefits and lost taxes in one year alone.

New chance for Chrysler

Yesterday's news that one of the big three American car making giants is being forced into federal bankruptcy doesn't appear to have generated the dark headlines that might have been expected.

Chrysler was effectively pushed into the move by President Obama whose administration believes that it can now be forced into an industry saving alliance with the Fiat motor company.

Chrysler became the first major American automaker to seek bankruptcy protection since Studebaker did so in 1933.

According to Obama the move will protect 35,000 at what he described as “a pillar of the industrial economy."

The company will now stop production for at least the next 30 days to reduce its inventories.

The risk will be that during this time,customers will go elsewhere and the company will struggle to get those customers to return

As the Washington Post says this morning

Moreover, there is no guarantee that a slimmed-down, Fiat-managed company would fare significantly better than Chrysler has in the past against foreign competition such as Toyota and Honda, which essentially dethroned the American automakers years ago.

The hope is that the company will come out of bankruptcy by the end of June.Next up is General Motors which has 30 days to present its plan to the government

Electric Hype

So the government is thinking about a £5,000 pound scheme to get people top buy electric cars from 2011.

This is on top of a much flounted atempt to pay people £2,000 to trade in their old cars for more environmentally efficient ones.

Is this the right way to go?

Well read the editorial in the Guardian this morning

it provides dubious economic benefit, probable environmental harm and, crucially, will only heighten Britons' dependence on cars when we ought to be weaning ourselves off them. The economics are simple: all taxpayers - princes and paupers alike - will be paying for a few lucky souls to treat themselves to a new car. This scheme will pay for part of its own way, but it is likely to cost more than the loan guarantees that Jaguar-Land Rover asked for last autumn.

As for specifically electric cars,how exactly are these going to be made and the infrastructure put in to support a network?

We should be thinking about electric buses and more trains rather than cars, and emphasising public rather than private transport, especially in urban conurbations. Over the past century, the car has gone from rare luxury to commonplace utility. Over this century, it will need to reverse that journey.

New uses for old industry

With this morning's news on car sales maybe this posting from Robert Reich should be listened to.

It was written followong the latest US unemployment figures which came out on Friday

Energy independence and a non-carbon economy should be the equivalent of a war mobilization. Hire Americans to weatherize and insulate homes across the land. Don't encourage General Motors or any other auto company to shrink. Use the auto makers' spare capacity to make busses, new wind turbines, and electric cars (why let the Chinese best us on this?). Enlarge public transit systems.

Car production plummets

Some devestating news on car production form the society of Motor manufacturers is out this morning.

Car production in February fell by 59 per cent across the board with commercial vehicles hardest hit by nearly 71 per cent.

“The large fall in February’s vehicle production is a direct result of weak demand and the need to protect the highly-skilled workforce and valuable industrial capability in the UK automotive sector,” said Paul Everitt, SMMT chief executive. “We have seen action to encourage longer-term investment, but still require government support for short-time working, easier access to finance and credit and the implementation of a vehicle scrappage scheme.”

Remember this is not sales this is production,so on this basis car sales are forecast to be a lot worse than this

Is this going to be the forthcoming economic battle

Across cities, there is a strong connection between an abundance of small firms and local growth. The last thing that the government should be doing is propping up big declining firms. Real innovations are far more likely to come from someone’s garage, which is where Chester Carlson came up with the Xerox machine during the Great Depression.

So writes Edward Glaeser,economics professor at Harvard.

He is refering to Barack Obama's economic stimulus plan and in particular the rescue packages for the car industry.

Ht-Andrew Sullivan

When is a bail out not a bail out?

Answer-when it is a government backed loan scheme apparently.

The problem for the government over yesterday's announcement was that it had been hyped up since October as the answer to all of the industry's problems.Following the American announcement on their industry,the speculation had exceeded all reasonable expectations.

Mandleson's proposals had a number of constraint's placed upon them before they could be agreed.Firstly the government was limited in the amount of state aid that could be given by EC regulation.

Secondly the growing pressure on public finances would have meant that any additional borrowing would have broaden the calls that teh country was going bankrupt.Mandleson was at pains in the Lords to repeat that this was not additional funding but cash that the chancellor has already allowed for.

Thirdly critics would have said what distinguishes the car indutry from any other.The Government is already seeing signs that continued pumping of money into the banks is turned the electorate's opinion.This would have added to the criticisms and in addition other industries would have said well why not is then?

Peter Mandleson is to meet the,by all accounts this morning,disappointed car industry leaders and unions later today.

Writing in the Times Carl Mortished says that

compared with the £600 billion package of loan guarantees made available to the banks, it looks more like a thimbleful.
Britain's motor industry will get access to £2.3 billion in loans, a fraction of the $17 billion US scheme and less than half what is promised across the Channel, where the bailout will include equity capital rather than just loans.

That seems to be the general consensus this morning but as the FT says

Peter Mandelson will hope to secure a more enthusiastic response when he meets the motor industry on Wednesday. The business secretary can argue that he has fought the sector’s corner, persuading the Treasury to agree the UK’s first support package for a non-financial sector in this recession.

Why there should be a distinction between banking and car making

Do read Hamish McRae's article in the Independent this morning warning of the dangers of the government going down the route of supporting Jaguar and reminding us not to compare the situation with that of the banks

had the Government not rescued and re-capitalised the banks they might have gone under. A collapse of any large bank would be so catastrophic to the whole economy that it could not be risked. Cars matter but banks matter more. By contrast Land Rover and Jaguar have the backing of a powerful Indian industrial group; they have only been acquired a few months ago; and while Tata is under pressure right now, its survival is not in question.

Its a good point although I am sure that the public have yet to be convinced that saving jobs in the banking sector is more important than saving jobs in the rest of the economy