Mandelson set to unveil help for car industry

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The announcement, to be made to parliament after 15:00 today, will outline ways "to ensure that we have the strongest possible car industry in the future", the spokesman said.

"We will help them both with the immediate concerns that they face, but also, and this is a very important point, about ensuring they make the changes necessary in order to prosper for the future."

"It is not a bailout," the spokesman said, adding that the package will use funds set aside in November's pre-Budget report for specific sector interventions.

"Any interventions we make will be well targeted and in order to ensure that strong viable businesses that are currently facing difficulty get the liquidity and short term credit that they need to get through this difficult period."

A number of European countries are considering measures to restart car industries after the effects of the credit crunch and a global downturn stalled demand.

Mandelson will meet industry representatives on Wednesday to discuss the measures. The sector wants easier access to car loans to entice reluctant motorists back into the showrooms.

It has made clear repeatedly it does not want a bank-style taxpayer bailout, preferring instead to call for measures including the resumption of direct lending, state-backed loans or short-term funding to subsidise layoffs.

The industry suffered its sharpest fall in output in nearly 20 years last month, with production barely half that of 12 months earlier.

The Society of Motor Manufacturers and Traders said it wants support for a European Investment Bank loan package, access to special liquidity arrangements for car maker finance companies, increased capital allowances for business and fleet buyers and a review of legislation on changes to business rates relief.

The bulk of the British car industry is foreign owned.

Carmakers have had to cut production and jobs sharply after falling demand both at home and abroad, including 1,200 jobs at Japanese carmaker Nissan's Sunderland plant in northeast England.

Mandelson was in India last week and had talks with Tata Motors, owners of luxury car maker Jaguar Land Rover which announced 450 job cuts two weeks ago.