Business secretary Lord Mandelson is sympathetic to the pleas from the motor industry to agree a financial rescue package that could safeguard the jobs of thousands of UK workers.
Industry representatives from manufacturer, retailer and supplier sectors have held up to four meetings with Mandelson over the past 10 days, in addition to countless others with influential MPs, in a bid to strike a deal.
However, according to one source, while the Government is sympathetic it does not have any solutions. “We need access to credit; the banks have to start lending again – but the Government doesn’t know how to make this happen,” he told me.
Bridging loans on commercial terms and wider guarantees for loans from banks are all well and good – but they provide only short-term respite.
Ultimately, the public has to start spending money again,” the source said.
While carmakers with UK plants are taking their own actions to cut costs, the situation is less severe than that for the Big Three (GM, Ford and Chrysler) in America.
With a £9.4bn financial rescue package on the table, Republicans unexpectedly scuppered the deal in the Senate. Their excuse was that the powerful United Auto Workers union would not accept cost-cutting measures that would have forced the carmakers to operate with the same labour costs as foreign-owned companies like Toyota, Hyundai and Kia by next year.
Unless a new deal can be agreed – and soon – at least one of the big American Three will enter Chapter 11. That might not be a bad thing.
Look at the examples of Delphi and Federal-Mogul, two huge tier one suppliers that have been reshaped under Chapter 11 and are coming out the other side leaner and more stable. Each has made huge redundancies and site closures, but each now has funds to invest in its future.
Chapter 11 is as close as it gets to ‘business as usual’. The restructuring takes place primarily in America, leaving global operations intact and funded by cash from the US government.
The bigger question is whether the American administration has the bottle to allow one of its home carmakers to slip into Chapter 11. Or whether it will, as reported this week, dip into its own $700bn bank bailout package. Within the next few weeks, we will have the answer.