BL asks for more state cash

BL asks for more state cash
By Clifford Webb Motoring Correspondent

BL has told the Government that if the steady improvement of its Austin Rover group is to continue, in the face of a growing challenge from General Motors of America, more public funding will be necessary to develop the next generation of new cars.

The warning is contained in the BL corporate plan covering 1985 to 1990, which has just been submitted to the government. The news will come as a shock to government supporters who thought that the taxpayer had made his last contribution to a company which has received £2.3 billion of state aid since 1975. The final tranche of government aid was drawn by BL 18 months ago. Since then Jaguar has been sold for £297 million and the profitable Unipart subsidiary is expected to be privatized next year.

In the past five years Austin Rover has, with one exception, replaced its range. Project XX, the replacement for the big Rover saloon, which will be launched jointly with Honda of Japan late next year, will be the last model developed with existing government funding. To maintain a rolling programme of at least one new model every two years, it is estimated Austin Rover will need to invest a minimum of £150 million a year, increasing to £200 million within three years.

Despite continuing losses BL's balance sheet has been basically strong. Thanks to state aid it has not been saddled with heavy interest payments on privately-raised loans. However, that position is changing and it must now go the City and pay competitive rates for funds. A public commitment from the Government to provide further funding on evidence of urgent need, would provide the additional backing BL needs when it goes to the banks.