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Analysis: European car sector needs cash

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by Stefan Nicola
Berlin (UPI) Nov 18, 2008
General Motors is not alone: European car companies are also in need of cash to avoid bankruptcy, with EU officials mulling continent-wide bailout plans.

In Germany and France, automobile manufacturers are suffering from dwindling sales because of the financial crisis.

Germany's Opel, a subsidiary of General Motors, asked Germany for more than $1 billion in credit guarantees. Another $1 billion is to be provided by governments of German states where Opel has plants, according to media reports.

After an emergency meeting Monday with officials from the car producer, German Chancellor Angela Merkel announced she would be willing to help Opel if it was indeed necessary.

"It's important �� that we try to support the auto industry,'' she announced over the weekend.

French Finance Minister Christine Lagarde on Monday called for national and European strategies to help the car sector. France has tens of thousands of jobs linked to automakers Peugeot and Renault.

Luxembourg's Prime Minister Jean-Claude Juncker in a newspaper interview together with German Foreign Minister Frank-Walter Steinmeier said bailout plans should be drafted on an EU-wide level. Juncker said U.S. plans supported by President-elect Barack Obama to provide at least $25 billion in loans to the American car sector call for a European reaction.

"If the U.S. government rescues Ford, GM and Chrysler from bankruptcy with billions of dollars, then we can't simply watch and leave (car) producers in Europe alone," he told German daily newspaper Bild.

European automakers already have asked Brussels for 40 billion euros in low-interest loans to switch to more environmentally friendly cars.

Nearly 750,000 people currently work for automakers or their supplier companies in Germany, the continent's main automobile nation. Already, luxury brands such as Mercedes and BMW are battling lower demand in the United States. A bankruptcy of any German auto firm would have catastrophic consequences for Europe's largest economy, experts say.

Yet there remains some opposition to comprehensive bailout plans using taxpayers' money. Critics say money shouldn't be thrown at firms that have failed to adapt to new market realities; and it isn't and shouldn't be Berlin's responsibility to reverse consumer trends, they say.

Critics point to a failed car bailout -- that of British Leyland, a carmaker that received some $16.5 billion in government aid in the 1970s and 1980s before going out of business.

"The British Leyland experience is a relevant and cautionary one," John Casesa of the automotive consulting firm Casesa Shapiro Group in New York told The New York Times. "The government got in the business of trying to make a winner out of a structurally flawed company." That could be the risk in the United States and Europe as well.

Like virtually every automaker in Europe, Opel has been battling slow sales recently, but the current crisis is linked mainly to the financial problems of the mother company, analysts say. For years GM has produced gasoline-intense cars that by now have turned into shelf warmers.

Berlin has said any cash it hands out to Opel should stay in Germany, securing the estimated 100,000 jobs at Opel, supplier firms and affected companies.

Merkel on Monday invited Opel Managing Director Hans Demant, GM Europe head Carl-Peter Forster and Klaus Franz, Opel's top employee representative, to the Chancellery for crisis talks.

Opel over the past few days asked for help to stem the crisis from Berlin and several state governments where the company has plants. The loan guarantees are only a "protective network" for the "absolutely unrealistic event" that Opel can't pay its bills, Forster said.

And even if that event became reality, European history also has positive bailout examples. France in the 1980s spent some $5 billion to save ailing Renault. Today, the automaker is among the most profitable in Europe.

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Beijing will not restrict car sales, say officials: Chinese state media
Beijing (AFP) Nov 19, 2008
Beijing authorities have decided against restrictions on private car sales proposed by residents to help ease traffic and pollution, a senior official was quoted by state media as saying Wednesday.







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