Ministers are considering offering financial support to Jaguar Land Rover’s suppliers but are understood at this stage to have ruled out a broad furlough-style scheme for their employees.
JLR, Britain’s largest car manufacturer, has been debilitated by a malicious cyber attack, with production lines in the UK, India, Slovakia and Brazil shutdown since the start of September, and scheduled to be closed until at least the start of next month.
The prolonged shutdown of its assembly lines and engine manufacturing in the midlands and on Merseyside poses enormous risks for the hundreds of companies in its supply chain.
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Around a quarter of those companies are already laying off temporary staff and restricting permanent hires to short hours, with another quarter thought to be facing similar decisions in the next week.
At one major supplier some staff have been reduced to working zero hours, others cut back to half their paid hours, and others told they are free to seek temporary work elsewhere until production resumes.
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Business secretary Peter Kyle, who only took up the post five days into the shutdown, has been under mounting pressure to act since it became clear JLR faces a prolonged closure.
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That is only likely to have intensified if a report that JLR had no cyber insurance cover is true.
He is understood to be willing to offer financial support and is considering a range of options. One proposal, first reported by ITV News, is for the government to buy stock from suppliers in order to provide them with cash flow, and then sell it on to JLR when it resumes production.
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That would be deeply complex given the just-in-time nature of the supply chain, with JLR unable to store parts and no guarantee they would all be required when production resumes.
It would also be hard to discriminate between the major multi-national companies in the supply chain, who arguably have the cash flow to support their local operations, and smaller companies in the lower tiers of JLRs supply chain at a real risk of bankruptcy.
While smaller suppliers are already laying off staff and struggling with cash flow others are unaffected.
Japanese company Denso, the world’s second-largest car parts supplier with turnover of more than $45bn last year, told Sky News: “As of now, our operations and supply in the UK are continuing as usual. and there have been no layoffs or production stoppages at our facilities.”
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Unions have called for a furlough scheme similar to that operated during the pandemic to be offered to the auto supply chain, but sources have indicated that is not considered the right option.
It would come with significant cost and carry the same risk of offering indiscriminate support rather than targeting those smaller firms most at risk.
Mr Kyle and industry minister Chris McDonald visited JLR and some of its suppliers on Tuesday. Speaking to Sky News Mr McDonald said they were “mapping the supply chain” to assess where help might be required, but indicated that he considered JLR should take responsibility for supporting companies: “This is JLR’s supply chain,” he said.
While unions favour intervention, any decision to deploy taxpayer funds would have to be justified against JLR’s own resources.
The company made profits of £2.5bn last year and is backed by Tata, the giant Indian conglomerate that has received close to £1bn in state support for its other UK concerns in the last 18 months, including a battery factory in Somerset and the electrification of the Port Talbot steelworks.
JLR cannot say how long they will be closed, but they will need the supply chain when the production lines start rolling again.
