THE bail out we all knew was coming has arrived with the government offering car firms £2.3bn in aid.
Business secretary Lord Mandelson has outlined a range of packages that will help struggling carmakers.
Part of the deal will see £1.3bn worth of loans unlocked from Europe, according to the BBC, which will go towards helping manufacturers and suppliers to the industry.
A further £1bn in loans has also been guranteed.
Lord Mandelson told the House of Lords that the UK car industry was ‘vital’ and that they had huge bearing on regional economies across Britain.
The moves come amid a host of cuts at factories, with staff being laid off and tools downed for prolonged period.
The problem is demand has dried up just as credit has evaporating, squeezing makers in more ways than one.
There are a number of green caveats that makers have to meet before they get their hands on the cash such as investing more in eco-friendly technology.
The moves have been generally welcomed by the industry.
‘This is an important announcement that recognises the strategic contribution of the motor industry and follows action in other EU member states, the US and Japan,’ said Paul Everitt, SMMT chief executive.
‘The UK motor industry is productive and globally competitive with a long-term future at the heart of the low carbon agenda. We look forward to discussing the substance of the announcement at our meeting with Lord Mandelson tomorrow.’
Sue Robinson, director of the Retail Motor Industry Federation added: ‘Consumer confidence in car-buying could receive a boost as a result of the government’s public show of support for the motor industry.
‘This investment in the industry should send the right message to consumers, endorsing the availability of credit and the excellent deals in the showroom.’
Following his statement, Lord Mandelson made reference to a self-financing scrappage scheme that would encourage motorists to dispose of older and more polluting vehicles, in favour of newer vehicles too.
Shadow business secretary Ken Clarke said the package seemed ‘pretty small beer’ adding: ‘I’m slightly disappointed. I thought the secretary of state who I am shadowing would produce some new ideas, some dynamite.’
Stephen Sklaroff, of the Finance and Leasing Association said he was awaiting a meeting ‘to discuss with Mervyn Davies on how best to support all types of lenders to free up credit for new and used cars’.