Last-ditch deal saves British van maker

LDV, one of Britain's last homegrown motor manufacturers, is understood to have clinched a crucial refinancing deal that insiders hope will allow the van maker to restart production.

The company, which employs 1,200 at its Washwood Heath factory in Birmingham, is expected to announce details of the deal later this week after it emerged over the weekend that it has been in talks with an American private equity group.

LDV suspended production of its vans 10 days ago, a move which raised concerns that the company was facing a cash crisis. However, spokesman Steve Miller said last night that the company had taken the decision in order to "rebalance stocks". He said production would restart later this week. "We said earlier this year when we launched the Maxus [LDV's new van] that we would need to raise more money to develop the business, launch new models and develop an export strategy. The money is in place and we will be announcing how much by the middle of next week," Mr Miller said.

A successful outcome to the discussions, which will see the new investor pick up a minority stake, will be a relief to the government which is anxious to prevent a rerun of the MG Rover debacle, which resulted in the loss of nearly 6,000 jobs in the Midlands. Any failure of LDV would have been a particular embarrassment to Patricia Hewitt, who in March, while trade and industry secretary, was the guest of honour at the opening of the company's new multimillion-pound production line.

A spokesman for the Department of Trade and Industry said last night: "We are aware of the situation but it is a matter for the company."

LDV was formed in 1993 through a management buyout from Leyland DAF, the now-defunct truck maker. The company was refinanced in 2004 in a deal that saw European Acquisition Capital and Barings English Growth Fund emerge as new backers alongside its original private equity partner, 3i.

The Maxus has won numerous awards and the Post Office recently ordered 250.

LDV makes about 12,000 vehicles a year from its 85-acre site close to the M6. In addition to its van business, LDV also owns one of Europe's biggest pressing businesses. It plans to increase production to 14,000-15,000 next year as two new Maxus models come into production - a mini-bus and a chassis cab version.

Mr Miller said LDV's initial plan had been to start production of the new models towards the end of 2006 but the latest refinancing would allow the company to bring that date forward by six months.

When LDV opened its production line in March, its chief executive Allan Amey said a strong UK automotive industry and a thriving LDV was of fundamental importance to the Midlands economy.