The Government said it had agreed to provide a £5m bridging loan to struggling vanmaker LDV while it arranges financing for a sale to Weststar, a Malaysian contract manufacturer. The deal comes in the nick of time: LDV was due to go into administration today, with PwC waiting in the wings. But after some frantic last-minute negotiations, it looks like the vanmaker has dodged the bullet – great news for White Van Men everywhere, not to mention the 850 factory workers (plus various others in the supply chain) who were set to lose their jobs. But the Government has made clear that this is a one-off deal – will it turn out to be a permanent rescue, or just a stay of execution?
LDV’s prospects were looking pretty grim last week. It was pretty clear that Russian owner Gaz (owned by zillionaire Oleg Deripaska) had effectively washed its hands of the business, which ran out of cash and halted production last December. CEO Evgeniy Vereshchagin has been desperately searching for new funds, but despite Weststar coming round to kick the tyres, no concrete offer had materialised. It also looked like the Government was reluctant to help, possibly on the grounds that Deripaska's chumminess with Business Secretary Lord Mandelson might have given people the wrong idea (or the right idea, depending on your point of view). Administration seemed inevitable.
However, somehow LDV has come up with a rescue package at the eleventh hour. Weststar, which has been a commercial partner of LDV for the last two years, apparently agreed to buy the vanmaker from Gaz on Monday - and with a deal in place, the Government has agreed (rather reluctantly, if the trade unions are to be believed) to stump up a loan to tide them over. Reports suggest Weststar will now inject £50m to help LDV reinvent itself as an electric van maker - still based in Birmingham, but shifting a lot more vans over to Malaysia.
LDV isn't counting its chickens just yet: the finer points of the deal are still to be hammered out, and if it relies on getting bank funding - no easy task, even for companies that are actually making money (which LDV isn't) - there could yet be another twist in the tale. And even if the deal does happen, there'll be a lot more work to do - LDV hasn't made a profit for years, so Weststar will have to find some way of getting it back into the black. With so many jobs on the line, an unpopular Government was always going to find it tough to turn this request down. If there's a next time, Whitehall may not be so accommodating.
In today's bulletin:
Brits must work until 70 and pay more tax
Van-maker LDV back from the brink
Tchenguiz vs Horlick - handbags at dawn?
Desperate directors turn to fraud
Eight ways to deal with the threat of insolvency