Mandelson dragged into row over oligarch bail-out

LORD MANDELSON'S aides today said he has ruled himself out of making any decision to bail out a UK van-maker owned by his friend Oleg Deripaska.

However, the Business Secretary faces fresh controversy over his links to the Russian oligarch, whose LDV firm is seeking a bridging loan of up to £30million.

The Business Department is in talks over a management buy-out of LDV to turn it into a manufacturer of "green" electric vans. More than 6,000 jobs are at risk if LDV collapses, the outgoing chairman of its parent company GAZ, Erik Eberhardson, warned today.

He told BBC Radio 4's Today programme: "Unfortunately since the company is not producing, it is not making enough revenue to cover its costs.

"The company is literally running out of cash as we speak."

He confirmed LDV is seeking a bridging loan from the Government of between £20million and £30million. But despite the importance of negotiations, Lord Mandelson - who enjoyed lavish hospitality on Mr Deripaska's £60million yacht moored off Corfu last summer - is said not to be taking part.

"He would not be involved in any decision that would ever have to be taken about LDV," said the Business Secretary's spokeswoman. "It would go to another minister."

Such arrangements will insulate Lord Mandelson from accusations he could have been swayed to support LDV because of his friendship with Mr Deripaska. However, they will also raise questions over whether the peer has allowed his love of the high life to restrict his ability to carry out his job as European Trade Commissioner and now Business Secretary - a claim he refutes.

Liam Byrne, Labour MP for Birmingham Hodge Hill, said he has spoken to ministers and senior officials at the Department for Business, Enterprise and Regulatory Reform about LDV's plight. But this morning he refused to say if he had discussed the firm with Lord Mandelson.

LDV stopped production at its Birmingham factory on 12 December, after the global downturn hit sales. Russian giant GAZ has invested tens of millions of pounds into the firm in recent years, leading to the creation of 200 new jobs. The plant, in the Washwood Heath district of Birmingham, employs 850 workers and has a dealer network employing a further 1,200. It also supports more than 5,000 jobs in supply companies.

LDV says a management buy-out aimed at transforming the manufacturer into Europe's first "green" van firm is nearing completion. The plan, led by Mr Eberhardson, is said to be at an advanced stage with prototypes of low-carbon vans already being trialled, and strong prospects of support from the European Investment Bank.

A spokesman for LDV said: "Short-term bridging support for this management buy-out from the Government will secure its future and the future of hundreds of jobs."

However, the Government knows it faces "hard choices" in the car and van industry and is unlikely to want to fund past losses of any company.

A spokesman for the Business Department said: "We have provided considerable support to LDV in recent years and continue to offer them help including assistance with their application for funding from the European Investment Bank."