British car makers must ride out lack of confidence; IN ASSOCIATION WITH Rensburg Sheppards The Big Feature.

Byline: Bill Gleeson

IT IS no surprise Alistair Darling is keeping the strings of the Treasury's purse tight shut when it comes to the car industry.

The Government has never been keen to bail out struggling manufacturers, as the case of MG Rover demonstrated when Long bridge was allowed to shut with the loss of thousands of jobs.

It's entirely consistent with that MG Rover decision for the Chancellor of the Exchequer to say now that neither Vauxhall nor Tata's Jaguar Land Rover will receive financial support from government.

Instead, it has to be hoped that the deal under negotiation in America to save Vauxhall parent General Motors will be indirectly beneficial to its British subsidiary.

It would be bad news for Ellesmere Port, where Vauxhall employs more than 2,000 staff, should GM go to the wall. However, the details of the proposed US car industry rescue probably rules out US government cash being passed on to the UK operation. Hopefully, though, Vauxhall can trade profitably on its own account.

The problems blighting General Motors in the US are much more severe than the challenges facing any part of the British car industry. It was back in 1993 that America's accounting standards regulators insisted that General Motors should make provision for its ever-mounting liability to meet the postretirement healthcare costs of its current and former employees and their families. That liability has turned what ought to be a lean, efficient bastion of capitalist free-enterprise into one of the most generous providers of healthcare and welfare in the world.

Of course, it doesn't help that car sales are plummeting, but arguably all the credit crunch has done is bring the issue of healthcare liability to a head a bit earlier than would otherwise be the case. Nor are there any easy solutions to the problem. The fact is the postretirement healthcare liability will remain a burden on US car makers for decades to come.

If the big three indigenous US car makers do eventually go bust, it won't be the end of car production in America. Toyota, Honda, etc, are making loads of cars there at much cheaper cost than their American rivals, and with no open-ended commitment to lifetime healthcare provision for their workers.

In Europe, in contrast, the problem is purely falling sales. The solution to this relatively short-term problem is a return of consumer confidence, which will happen in the not too distant future when banks resume lending and the fear of unemployment recedes.

In the meantime, things are very challenging. The Society of Motor Manufacturers and Traders issued figures last week that show a whopping 34% drop in car sales in the UK. The figure prompted one leading commentator to suggest the car industry was in its own depression.

Hopefully, our factories will still be here to take advantage of that upturn.

THE Mersey Partnership plans to run a pounds 750,000 advertising campaign to promote Liverpool as a value for money tourist destination.

It's a good ploy. Value for-money propositions are thriving in current conditions. As people seek to conserve money, they opt for the cheaper product.

However, TMP and others must remain wary of positioning the city in the wrong segment of the tourist market. In the long term, we want to be seen as the good value-for money option, not the cheap one. That could be a fine line.