Chrysler Uk Limited (Financial Assistance)

Part of the debate – in the House of Commons at 12:00 am on 17 December 1975.

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Photo of Mr Eric Varley Mr Eric Varley , Chesterfield 12:00, 17 December 1975

The remaining £27 million of the £55 million loan will be secured by a charge over the assets of Chrysler UK Limited and its subsidiaries. Drawings under this part of the £55 million facility will be made at any time before 31st December 1979, but only after the £28 million guarantee by the Chrysler Corporation has been fully utilised. Although the total potential commitment is £162–5 million, the House will see that the Government's financial risk, save in exceptional circumstances, is substantially lower than that.

The Chrysler Corporation will also be making a substantial financial contribution to Chrysler UK's activities over the next four years. The Corporation has agreed either to capitalise or to waive repayment of the £19–5 million already borrowed by Chrysler UK from the parent Corporation, and the Corporation will, in addition, be prepared to subscribe cash for new equity in 1976 up to a maximum of £10 million to meet 50 per cent. of the losses by Chrysler UK in excess of £40 million. In later years the Corporation will meet 50 per cent. of losses by way of further new equity or maximum contributions of £10 million, £7·5 million and £5 million in 1977, 1978 and 1979, respectively.

As I reported yesterday, the Chrysler Corporation will extend up to £12 million on the introduction of the C6 at Ryton. Altogether, therefore, the Chrysler Corporation faces total financial commitments, including the counter-guarantees to the Government, of £106 million. That excludes the £19·5 million that will be capitalised or waived.

Briefly, therefore, the Government stand willing, subject to the authority of the House, to enter into a total financial commitment of £162·5 million, which will have the benefit of counter-guarantees from the Chrysler Corporation amounting to £63 million, and the Chrysler Corporation is willing to undertake commitments of £106 million.

I turn to the form of the Government's participation, which I know has exercised many of my hon. Friends, some of whom have tabled an amendment about securing equity stock in the United Kingdom subsidiary. The Government's attitude towards equity participation has been determined by the needs of the Chrysler UK Company. It would have been relatively easy to acquire the whole of Chrysler UK at very little cost, although with substantial liabilities. In isolation, the United Kingdom company, wholly owned as it could have been, could have had no prospects of success. It would have been too small, and the scope too limited. For reorganisation and revitalisation of Chrysler UK to succeed the company must have access to the wider technical, marketing, managerial and development base that only a large manufacturer can provide. In the mass car market scale is of the essence, and without it the necessary economies and competitiveness cannot be achieved.

My hon. Friends may ask why we did not take a lesser stake. In so far as that would have been practicable, the stake would have had to amount to control of the United Kingdom operation or would have placed restraints on the effective involvement of the Chrysler Corporation in the whole range of Chrysler UK's activities. Such participation would have been irrelevant to a soundly-based solution.

I draw to the House's attention the declaration of intent made by the Chrysler Corporation in this respect. Chrysler UK will be treated in all respects on a par with other Chrysler subsidiaries throughout the world. It will have an expanding role in the Chrysler Group, its model range will be planned as an integral part of the Chrysler overall world plans, and new models will be introduced in both the car and the commercial sectors.

I certainly understand the concern of my hon. Friends for accountability when Government funds on this scale are involved. Such accountability is essential, and I hope to explain that we have had some assurances on this matter. Arrangements have been made to provide necessary controls through the right to appoint directors to the board of Chrysler UK. This will also be increased by employee participation in the company—another and no less important form of accountability.

We shall enter into a planning agreement with Chrysler Corporation and the loan arrangements that we shall conclude with both the Corporation and Chrysler UK will provide for the latter to make available management and financial information to the Government. There are a number of procedures by which the Government will be able to monitor the company and to express legitimate interest in its future.

I have briefly covered a number of issues, and I am sure that many comments will be made and questions asked tonight. If they require an answer from me, and if the House agrees, I shall seek to intervene at the end of the debate to reply to them.