Car industry executives have warned the Government that they need aid in the next couple of weeks to avert worsening shutdowns, the collapse of some businesses and job losses.

The Society of Motor Manufacturers and Traders (SMMT) and executives from companies in the manufacturing, supply and retail sectors of the industry told Lord Mandelson, the Business Secretary, that they needed urgent direct help.

As they pressed the Government for an emergency financial boost, Jaguar Land Rover (JLR) said that it was cutting 850 agency positions - half of its workforce supplied by agencies. The move takes its job loss total to nearly 2,000. The company, which has asked the Government to help it to secure a £1 billion loan, has already cut 500 temporary worker positions and is looking for 600 permanent job cuts.

The car industry told Lord Mandelson that the most critical problem was liquidity. It wants money to be injected into car finance immediately so that customers can buy in the UK market. New car sales in Britain have crashed in the past few months and the SMMT said that most purchases are made with loans and those loans are not available.

The society wants the car companies' finance arms to have the same access to recapitalisation as the banks. It has said that it needs access to cash either through pressing the banks, through government underwriting or through direct government finance.

Paul Everitt, chief executive of the SMMT, said: “We emphasised the urgent need to address liquidity and restore demand, and discussed a variety of measures to address these challenges. Government and industry have agreed to explore collaboratively, a range of solutions in a timescale that matches the urgency of the situation.”

The Department for Business said: “The Government is continuing to address the issue of access to finance to boost the economy and encourage consumer confidence.”

JLR, which is owned by Tata, the Indian conglomerate, said that its agency job losses will cover a range of positions at its operations in the West Midlands, including IT and engineering consultants. It has told its agencies that it will need only half its usual number of workers from the end of the year.

The British car industry's appeal for help came as Spain announced a €800million (£670 million) package for its automotive sector as part of an €11 billion two-year package to boost the country's flagging economy and cut unemployment.

Spain's ailing car industry accounts for 20 per cent of exports.

Car industry bosses, including Jean Pierre Laurent, chief executive of Renault España, had criticised José Luis Rodriguez Zapatero, the Spanish Prime Minister, for failing to do enough for car companies that are laying off thousands of workers as demand plummets. Mr Zapatero said: “This is a sector with a future and we are backing it.”

The regional government of Aragon in eastern Spain yesterday announced a €200 million loan to General Motors Europe so the US car giant can start production of the new Opel Meriva at its factory in Zaragoza. General Motors said that it needed €595 million to keep its European factories running.

Daimler of Germany said that it was considering a shortened working week at its four Mercedes-Benz factories in Germany for four months beginning in January. The German Government has said that if the company, which is halting Mercedes Benz production for all of December, introduces a shorter week in the long term, it will make up the shortfall in the workers' pay.

Porsche setback

Porsche suffered a fresh setback yesterday in its long campaign to take control of Volkswagen when a regional court backed the state of Lower Saxony’s blocking of the takeover.

Lower Saxony, where VW is based, has a 20 per cent stake in Europe’s biggest carmaker, designed to block takeovers and permit control over significant decisions such as factory locations.

The European Commission has ruled against the blocking legislation, but Germany is appealing. Porsche, which owns 42.6 per cent of VW and has options over another 31.5 per cent, is expected to challenge the latest judgment. The battle is likely to go to Germany’s highest court.

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