Government Loan to help Rover (2)

It looks like the screws continue to be tightened at Rover, yesterday it was announced that Rover car sales were down 17% on a year ago compared to a 5% overall reduction in car sales in general. Today, "not-so-loyal local" component suppliers are doing what all properly managed companies would do on such news, they are reducing their credit exposure to Rover by presumably asking for cash on delivery. As a result, Rover car production has now ceased. It is always ironic that when a company needs credit most, such as Rover needs now, it becomes more expensive and more difficult to arrange.

Banks earn money by making good credit decisions, if they are not prepared to lend their money, why should you or me through the Government? The Government is said to be the lender of last resort, but that's for systemic bank failure, not for bad credit risks. If Rover is going to fail, it should be allowed to, the Government should not intervene. It is not God.

Tony Blair has announced that he will do "All he can" to save Rover. Frankly, his announcements are starting to remind me of John Majors' announcements. When John publicly supported a member of his cabinet in one of the many crises that afflicted his premiership, you knew it was really the death knell.

Like most other problems, Tony washes his hands of the real problem, in this case a lack of consumer demand for Rover cars and concludes that the solution, once again, is to throw (your) taxpayers money at the problem to keep away those nasty headlines (until after the election, if I'm feeling particularly cynical). Will he be legislate to prevent companies limiting credit lines to Rover? Will he announce that consumers have to buy Rover cars rather than other makes? Will Government departments now have to buy Rover cars? Will he set up a quango, OffCar, to offer "expert" management advice? If Rover doesn't pay back the £100m, what happens? How do we know that £100m is all that is needed? Will another £10m be forwarded if negotiations aren't concluded satisfactorily?

Unions can already scent the smell of dollops of taxpayers money in the air and are already starting to ask for similar assistance at Peugeot in Coventry.