Mandelson gives LDV row the swerve

The Business Secretary won't decide on LDV's bid for state aid - because it's owned by Oleg Deripaska...

Last Updated: 06 Nov 2012

As Business Secretary, it would ordinarily be Lord Mandelson’s job to decide whether the struggling LDV deserves a state loan – but since the van-maker is owned by his Russian yacht-buddy Oleg Deripaska, the Business Secretary has had to rule himself out of the decision-making process, according to the Evening Standard. LDV, which is part of Russian group Gaz, says it needs the money to tide it over as it finalises the details of a management buy-out – but the political connections of its oligarch owner may end up doing more harm than good…

LDV’s day of reckoning has been coming: the company shut down production on December 12 in the face of tumbling sales, so it hasn’t churned out a new van for over two months now. With Gaz apparently reluctant to inject any more funds (after spending tens of millions in recent years), it’s currently just burning through its cash pile. And since it employs 850 people in its factories, plus another 1,200 people in its dealer network (and supports thousands of others in its supply chain), its failure would have significant consequences.

Now this probably wouldn’t be enough in itself to merit an injection of Treasury funds. But CEO Erik Eberhardsen plans to revive LDV’s fortunes by transforming the company into a manufacturer of green vans – so he reckons that this qualifies the van-maker for temporary state aid as part of the Government’s support for green technologies. He’s currently trying to arrange a management buy-out, and claims that plans are at an advanced stage – including prototype vehicles and a promise of support from the European Investment Bank. So this could improve its chances.

On the other hand, Mandelson’s connection to Deripaska definitely muddies the waters. Although the Business Secretary is seemingly the go-to guy for auto-industry loans, he’s going to have to steer well clear of this one to avoid accusations that he’s doing his old chum a favour (and after inviting him to spend the summer on his yacht, Deripaska might think he owes him one). Shadow Chancellor George Osborne, another guest on the yacht this summer, has already cranked up the pressure by insisting that the van-maker should definitely not get bailed out (which we’re sure has nothing to do with their subsequent public spat).

It’s difficult enough for the Government to justify specific company bail-outs, but it’ll be even more awkward in this situation. So regardless of the merits of LDV’s claim, this loan would be pretty controversial politically...

In today's bulletin:

Northern Rock starts lending again as banks feel the heat
Mandelson gives LDV row the swerve
Ryanair's check-in desks checking out
Were our big banks run by psychopaths?
Editor's blog: Sadness as Saab reaches the end of road

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