UK auto aid approved by EU, now accepting bids for share of £2.3 billion

The weak economy knows no borders, rampaging across the globe taking its toll in lost jobs and bankruptcies. The car industry in particular is no stranger to this strife, and some might say Great Britain's carmakers most of all, considering their rocky history. In late January UK Business Secretary Lord Mandelson announced the government would offer loans totaling up to £1.3 billion with another £1 billion in guarantees to the struggling industry (£2.3 billion, or $3.25 billion in total), but it had to clear approval with the European Commission's trade practices authorities. Today that approval has come through, and the government is now accepting bids for shares of the funding.

Far from a bailout, and coming up well short of the $17.4 billion already promised to U.S. carmakers, the UK loans package will be directed at helping UK car manufacturing facilities stay afloat, preserving jobs for Britain's industrial sector. A separate grant of $27 million was made to Land Rover for the production of the LRX.

"There is a certain amount of cynicism by some suppliers who want to know exactly how the money will be distributed. In order to be eligible, you have to be a reasonably solid company with a specific project," a source inside the UK's Business, Enterprise and Regulatory Reform (BERR) department told Reuters on condition of anonymity.

Union officials think the UK loan funds are inadequate to stanch the flood of lost jobs, however, reports The Telegraph. "Two billion pounds sounds like a lot of money but at least half of this will be taken up by Vauxhall and Jaguar Land Rover alone, leaving little or nothing for the hundreds of component companies. This is a fraction of the support being given by almost every other government in Europe," said Tony Woodley, joint leader of Unite, the union that represents the UK's autoworkers, among others.

Lord Mandelson agrees that more must be done to preserve the ailing car industry, but sees it as part of an overarching scheme to help the British economy weather the global recession.

Preserving automotive jobs in the near term will be a key element in keeping Britain's economy afloat, however, as the car industry employs about 1 million people in the UK by Lord Mandelson's count.

"We need to counter this to prevent an irreversible loss of capacity, skills and technology," he said. "The health of the automotive industry is vital to the strength of manufacturing in Britain and is at the heart of many of our regional economies."