UK Govt to Bail Out Jaguar/Rover?

[hawk20]

According to Sky news the govt is considering bailing out Jaguar/Rover which was recently bought from Ford by the Indian comapny Tata.

Why on earth, some may ask, should UK taxpayers bail out an Indian company if it has paid too much? Tough?

The US only plans to bail out US owned car companies, not MB, Toyota, Nissan and so on who all have factories in the USA.

 

[television]

They will take it from pension funds that are in reality non existent, no one will notice

 

[rovingHawk]

Why on earth, some may ask, should UK taxpayers bail out an Indian company if it has paid too much?

Because it preserves UK jobs & reduces unemployment costs (both financial & social)?

RH

 

[hawk20]

Because it preserves UK jobs & reduces unemployment costs (both financial & social)?

RH

So where will you stop. Nissan (Sunderland), Toyota (Derbyshire), Honda (Swindon), Peugeot and on and on. So should we bail out everyone's car firms just because they have a factory in the UK?

And why just car firms. Why not Woollies? MFI? And on and on and on.

 

[mattsurf]

Governments around the world are desperately trying to prop up a house of cards as far as the business community is concerned. It is essential that Global Businesses de-leverage from their current debt position, however, if they are not supported then the whole global economy will collapse (and there is a real risk of this happening). Even very successful businesses are so leveraged that a relatively small reduction in demand will drive them into Banrupcy

As for the US big 3 car manufacturers, on one hand I do think that they should be allowed to fail, however, it needs to be a controlled failure. If Ford GM and Chrysler failed today, it would reduce US GDP by 10% - the global economy could not withstand this shock, and a massive depression would follow: consider the doomsday scenario, pension schemes would fail, house prices would fall by 75%, unemployment could rise well above 5m.

Therefore it is important that the US support the big 3, probably break them up and reduce their scale, closing down loss making divisions probably over a 5 - 10 year period.

All around the world, governments are looking at similar actions. In the UK the consequence of Jaguar or Land Rover Failure would be catastophic for the Midlands: it is irrelevant that they are foreign owned. In a better economic climate, it would not really matter, however, currently is essential.

Woolies and MFI are not important, their sites on the High Street will be filled, probably with supermarkets - the impact on the economy is negligable. The government should not waste money bailing out these type of companies.

I don't think that people realise how bad it could be. Imagine that BMW, Mercedes, VW, PSA, Renault etc will all be begging for government support, without which they may well fail.

 

[television]

Have not the world been over producing car and other commodities for some years, and now its all caught up with not enough people to buy the things, no one wants half the things on offer as technology renders many things obsolete before they hit the shelves in the stores.

So we pump money into all these things to prop them up,,at the end of the day there will still be a huge surplus of goods that no one wants

 

[Alex M Grieve]

In the UK the consequence of Jaguar or Land Rover Failure would be catastophic for the Midlands: it is irrelevant that they are foreign owned.

Lots of excellent points in Matt's post. Our own example in the Midlands is a microcosm of the global situation. Bear in mind that there has been a gradual loss of the motor industry here over decades, ratchetting down by degrees (consolidation of companies into BLMC, eventual demise of Rover), all supported by massive government parachutes.

Taken at that pace, supporting industries in the various tiers of suppliers, were able to diversify, although many disappeared.

The big3 in the USA have remained big over the years, although as hawk20 noted, GM have 4 pensioners for every employee, (following a major exercise a few years back when it was discovered that most of the workforce was over 50 years old and "early retirement" was the expedient strategy).

Well it may not seem today to have been such a good idea - and precipitate closure really would deflate the balloon and the millions of people in it.

If governments appear to be doing looney things to support lame ducks and lost causes, there may well be reasons for it - and in the longer term it keeps the means of production intact.

 

[jberks]

I see no problem with us supporting LR and Jag, but - its business, and I do worry that we will pump money in with no guarantees that jobs will be protected. Sure TATA says they want UK production facilities but in the current climate i'm sure they're reconsidering. So, I'd say, fine, pump money in, but we want a stake in return so we can at least influence future decisions.
I do agree with the points above though. We have been overproducing for a long time but we need a slow controlled rebalancing as if we let all the firms that are in trouble now just go, the resultant tsunami will drown us all.

 

[Jensen]

Who's made the money

What I want to know is WHO has made money out of this mess. It started in the USA with sub prime lending, lending to people who had poor credit with no income or assets to pay it back with. This was known as the NINJA mortgage - No Income No Job or Assets - Madness!
Somewhere somebody/people/organisation have made an absolute fortune from arranging this credit and selling it on, but who is this I am talikng billions

 

[jberks]

What I want to know is WHO has made money out of this mess. It started in the USA with sub prime lending, lending to people who had poor credit with no income or assets to pay it back with. This was known as the NINJA mortgage - No Income No Job or Assets - Madness!
Somewhere somebody/people/organisation have made an absolute fortune from arranging this credit and selling it on, but who is this I am talikng billions

In reality, a few people did make massive pots of cash, a good number made big bonusses in the 'city' for their hard work on perpretrating the fraud too. But, most of the money went into the economy (remember this money was paid over to builders and homeowners selling houses and subsequently it went to carpet firms, furniture mfrs, decorators and other housing trades) and eventually, once it had been round a few times, it was spent on imports - so who has the money? China mostly.
And yes, whoever came up with NINJA loans should be hung during the half time interval at next year's superbowl.

 

[hawk20]

First the banks made buckets of money from selling the mortgage backed securities. And bankers and financiers made vast fortunes from bonuses based on short term gains that would not and could not last. Then all of us made buckets of money when our house prices trebled. Some cashed up in time and rented. Some did equity release. Others have seen the prices starting to fall back down again and the profits (in the books) are fast disappearing. Banks too are seeing their housing backed assets declining in value and don't want to lend to other banks as they don't know how much toxic mortgage-backed debt they may have.

It didn't come from America. Northern Rock was before Lehman Brothers. We were doing 125% mortgages, and self assesment mortgages, and funding a buy-to-let boom with printed money, just as much as the same things were happening in the USA. We should accept at least half the blame for our woes. Our system was due for collapse whether or not the US system failed as well.

 

[jberks]

Our system was due for collapse whether or not the US system failed as well.

And yet, allgedly, Gordon ("is a moron") Brown's approval rating is on the way back up. Clearly we really do live in a no blame culture these days.

 

[television]

And yet, allgedly, Gordon ("is a moron") Brown's approval rating is on the way back up. Clearly we really do live in a no blame culture these days.

I know that I should not say this here, but most of his followers do not have much of a brain when it comes to financial things and these issues

 

[Jensen]

Sorry Hawk I can't agree. The Northern rock issue happend August last year, 2007. they could not raise funds on the money market as other banks were not lending to each other due to the credit crunch.
Our mortgage industry is regulated by the FSA, there is/was no regulation in America. What business model lends money to people with no hope of paying it back, NINJA mortgages. Technically the 125% lending was 95% secured ie a mortgage with the other 30% in the form of an unsecured personal loan.
The buy to let market should grow if as we are led to believe more people want to rent than buy.
This whole mess, and what a mess stems from America

 

[jberks]

Sorry Hawk I can't agree. The Northern rock issue happend August last year, 2007. they could not raise funds on the money market as other banks were not lending to each other due to the credit crunch.
Our mortgage industry is regulated by the FSA, there is/was no regulation in America. What business model lends money to people with no hope of paying it back, NINJA mortgages. Technically the 125% lending was 95% secured ie a mortgage with the other 30% in the form of an unsecured personal loan.
The buy to let market should grow if as we are led to believe more people want to rent than buy.
This whole mess, and what a mess stems from America

Fair point Jensen, but lets be honest, anyone who meeds a 95% mortgage is unlikely to be able to cover the 30% loan if things turn tricky and how 'prudent' was it (even without hindsight) to lend sums of £60,000 + without any form of security to someone they had already knowingly overstretched themselves with a mortgage, based on a historically low interest rate and by definition had no realisable assets?

Yes agreed, NR's cracks only showed as a result of it hitting the fan stateside where they made even NRs recklesness look thoughtful, but it was still a formula that had only one guaranteed outcome. Plus to be fair, had things continued ok, I doubt the latest $50bn fraud would have come to light either. So long as things continue, one silly dcision will mask the previous one. I remember watching a trendy singleton on the TV sitting in his London broom cupboard saying he had a 400k mortgage on it and was struggling. Ok, he was a complete imbecile for taking it on, but when we want something badly, its human nature to ignore some of the pitfalls. It's therefore the responsibility of the institutions to look at the situation intelligently, impartially and long term and make a decision based on the best interests of both parties, rather than as they did, as greedy comission grabbers only interested in getting a name on the dotted line.

Buy to let is a different issue really. It was a good thing up to 2002/3 ish but as a buy to let landlord I realised I'd missed the boat at that point, as far as getting any more were concerned anyway. The numbers simply didn't add up. By my calculations, to make it viable on a 3 bed semi, I'd need £100k to put down. As I didn't have it, I didn't bother. Others meantime were doing it with £10k down and banks were lending on that basis despite the fact that the property in question was one of hundreds of identical properties for rent (so full occupancy was unlikely) and even it it did happen by some fluke, the rent wasn't going to cover..

 

[hawk20]

Sorry Hawk I can't agree. The Northern rock issue happend August last year, 2007. they could not raise funds on the money market as other banks were not lending to each other due to the credit crunch.
Our mortgage industry is regulated by the FSA, there is/was no regulation in America.
The buy to let market should grow if as we are led to believe more people want to rent than buy.
This whole mess, and what a mess stems from America

Northern Rock could not borrow due to 'the credit crunch', you say. True. But what is that? It is that banks are full of mortgage backed securities, on which nobody will lend, as they are all dropping in value as house prices fall. Unsustainable. Both here and in the US. Either would have crashed without the other. Two bubbles. Two bangs.

As for buy to let, yes it should flourish if funded by those who can afford to do so even when house prices fall (which they can do as we now see and have before). But money was lent to those who were not well heeled and who were completely unable to survive with falling prices, or even with an increase in voids as people became unemployed. We know a nurse on under £20k per annum who has been lent £1.3 million pounds to buy properties and that is all unravelling at the speed of light. As Panorama showed, banks were lending the deposit as well as the main mortgage to buy-to -let people. And allowing mortgages on hugely over-priced flats. And letting people do self assessment mortgages so they could borrow way beyond their means. And agents helped them fill in all the lies on the forms to unlock the mountain of unsustainable credit. All the signs were there for a monster crash.

 

[shadowninja]

NINJA

You called?

 

[Juddian]

I hope the Govt (and i use the term loosely) should they decide to give a large dose of OUR money to Tata tie them into a deal whereby the land that Land Rover in particular but Jaguar as well sit upon becomes the property of the Crown again, until such time as the monies paid have been repaid in full with interest.

Am i the only one with an uneasy feeling about what Tata may have planned for the Solihull site in the future.

Advance notice of rant...

I for one am reaching boiling point with the lying deceitful greedy nature of most politicians of the main parties, i've got to the point now if one of them told me it was raining outside i'd have to go out and check.

Blair (and don't think you've heard the last of him) and others like him, just as bad as the overego'd (is that a word?) celebrities with their supermarket etc adverts.
Will there ever come a point when they have actually got enough £millions, or does the worship of mammon self infect like a parasite (most of them are these days).
They disgust me.

Sorry bout that rant over...