Government refuses cash boost for van firm

Thousands of jobs at risk after Russian-owned LDV is denied funds

(REUTERS)

Up to 6,000 jobs were at risk last night after the Government refused to provide an immediate multimillion-pound cash injection into the van manufacturing firm LDV.

Lord Mandelson, the Business Secretary, stepped aside from decisions over the future of the troubled company, which is owned by his friend Oleg Deripaska. His move will protect him from accusations that he could be influenced by the Russian billionaire who acquired Birmingham-based LDV through his firm Gaz three years ago.

The Government made clear last night that it was not prepared to contemplate a bailout, leaving a question mark over the business’s survival.

LDV employs 850 staff directly, with another 1,200 in its dealer network. An estimated 4,000 people work for the component manufacturers that supply the LDV production line.

LDV executives, who are planning a management buyout of the business in an attempt to relaunch it as a manufacturer of electric-powered “green vans”, have warned that the company needs a £30m loan to avert collapse.

They will hold further talks today with Ian Pearson, the Business minister, who is handling the negotiations in Lord Mandelson’s absence.

But the Department for Business has insisted it is the responsibility of Gaz to find the cash to keep LDV afloat. It argues that the taxpayer has pumped at least £20m into LDV over the past five years with no return. It also points out that the firm has been loss-making for most of the past 20 years.

A spokesman said: “We have written to LDV and reiterated our view that the primary responsibility for supporting LDV and the management buyout rests with Gaz. But in the absence of such support from Gaz, we cannot see a case for further assistance from the Government.”

LDV said the company needed the Government’s “short-term support” to enable the management buyout to get off the ground. A spokesman said: “This would certainly not be to fund past losses, which have already been assumed by Gaz.”

Lord Mandelson’s decision not to become involved in the negotiations follows the criticism he faced over his close links with Mr Deripaska. While still a European Commissioner last summer, he was a guest on Mr Deripaska’s yacht.

John Thurso, the Liberal Democrat business spokesman, said: “The important decision about whether to give this loan should be taken at cabinet level. It should not be passed to a junior minister in Lord Mandelson’s own team, who will be open to the accusation that he is taking the decision that his boss wants. The Chancellor must give his verdict on this request.”

Meanwhile, Lord Mandelson faces a backlash from Labour MPs after deciding to press ahead with plans to part-privatise the Royal Mail. A Bill to sell off a minority share is expected to be published on Thursday.

It puts the Business Secretary on a collision course with Labour MPs, 139 of whom have signed a Commons Bill opposing the sale. Hundreds of postal workers will join a massive protest today against the sale, which they claim could cost thousands of jobs.

But the Government says the business needs help to compete with private delivery companies.

* A new ICM poll published today also reveals that two-thirds of voters think Labour would stand a better chance of winning the next election if Gordon Brown was not the party leader. The poll also shows the Conservatives maintaining a 12-point lead.