BOSSES at Jaguar Land Rover (JLR) are warning they could be forced to axe thousands of jobs unless they secure emergency government aid.

The company is in talks with the Government over potential aid worth hundreds of millions of pounds to help see it through the credit crunch. Car sales have plunged over the past year, with luxury brands like JLR among the hardest hit.

But last night business secretary Lord Mandelson warned JLR will have to pass “tough tests” before it gets any help from the Government.

Playing down the prospect of a quick bail-out for the British car industry, he said the firm’s owners first had to “look to themselves”.

JLR employs around 2,000 people at its Halewood plant, primarily building Land Rover Freelander 2s and Jaguar X-Types.

Union leaders have already warned thousands of motor industry jobs could go unless the Government steps in.

Yesterday, reports said JLR chief executive David Smith was working on a contingency plan to cut thousands of jobs if aid was not forthcoming.

But Lord Mandelson was reported as saying: “I am closely following the fortunes of Jaguar Land Rover. My officials are in close touch with the company.”

But he added: “The Government cannot be the first call for help in these circumstances. The company’s owners have got to look to themselves and their own resources.

“If there is anything the Government can appropriately do for any such company, then they will have to meet – and pass – some pretty tough tests.”

The increasing pressure for a UK car industry bail-out follows President George W Bush’s decision on Friday to offer $17.4bn (£11.5bn) in emergency loans in exchange for concessions from managers and staff at car companies General Motors, Ford and Chrysler. General Motors’ Vauxhall plant at Ellesmere Port employs around 2,200 people.

Car sales around the globe have slumped since the credit crunch as people tighten their belts and as banks restrict their lending. New car sales plummeted by more than a third in November compared to 12 months earlier, with Land Rover sales in the UK falling 64% to 1,034 over the same period.

Last week, Derek Simpson, joint leader of the Unite union, said government funding should be confirmed immediately.

He said: “Only action by the Treasury in the next few days will safeguard the tens of thousands of jobs and the many communities across the country depending on car manufacturing for their livelihoods. Intervention must come this side of Christmas.”

CBI director general Richard Lambert said: “The Government has to stand in and put the public balance sheet behind an industry which is vital to our future.”

Reports yesterday suggested Lord Mandelson had asked accountants KPMG and investment bank NM Rothschild to advise him on a loan package for JLR.

Lord Bhattacharyya, a West Midlands industrial expert who is close to Jaguar Land Rover’s Indian owner Tata, claimed the Government was ready to help.

He suggested ministers were considering a £667m loan package for Jaguar Land Rover in addition to an unspecified sum for other car companies.

A spokesman for the Department of Business, Enterprise & Regulatory Reform declined to comment on speculation of a loan.

He said: “Lord Mandelson has said the Government does not have an open cheque book to bail out ailing companies. The Government is doing all it can to help businesses overcome the current financial and economic challenges.

“Jaguar Land Rover have owners who are well resourced, who have first responsibility for sustaining the companies that they own in existence and in production for the future. The Secretary of State has confirmed government is talking to industry bodies about the current economic difficulties.”

alistairhoughton