European Automakers Want Bailout Too

While the Big Three U.S. automakers plead for massive public bailouts, European carmakers have followed hot on their heels, asking governments for large soft loans to help keep their businesses afloat as credit markets tighten. The requests have led to a similar debate to that raging in Washington over whether the car industry deserves support from taxpayers and whether such a bailout would set an unfortunate precedent for other sectors. According to one report, the European carmakers have asked for a €40 billion ($51 billion) package from the European Investment Bank, while General Motors’ German subsidiary Opel wants €1 billion ($1.25 billion) from the German government in loan guarantees. Guenter Verheugen, the German EU Industry Commissioner, has warned that the collapse of Opel could trigger a domino effect on other companies in an industry that directly employs some 12 million people.

The Financial Times reports that top German government members such as Chancellor Angela Merkel and Vice Chancellor Frank-Walter Steinmeier are concerned about job losses should Opel fail, but also fear that a bail-out for the carmaker would lead to similar requests from other industries.

An Associated Press report published in The Washington Post says that EU Commissioner Verheugen supports a bail-out for Opel to avoid job losses and a possible ‘knock-on effect down the line’ should one car maker disappear. Verheugen claims Opel’s troubles have “arisen solely from the credit crunch in America.” He adds: “I want to be unequivocal on this: it is the parent company in the United States [General Motors] that has made the mistakes.”

UK carmakers and traders also asked the British government for financial aid and tax breaks to ease their transition through the new economic environment, according to a report by John Reed in the Financial Times. The report suggests that the plea is also aimed at putting pressure on Chancellor of the Exchequer Alastair Darling to scrap proposed increases in vehicle excise duty, based on the level of a vehicle’s emissions of carbon dioxide. The Guardian and The Times of London also report that British carmakers see their industry as being sound but seek credit loans to maintain liquidity and investment as the wholesale markets are squeezed.

The Guardian’s David Gow offers a seething commentary from Brussels headlined Banking Baddies get Help but Europe’s Car Industry is Left to Languish. He argues:

The European Commission, the chief guardian of the EU’s competition rules, is happily turning a blind eye to "moral hazard" and allowing a host of governments to rescue banks that were the architects of damage to themselves and the wider economy. At the same time, it is getting sniffy or even downright hostile with governments shaping up to save hundreds of thousands of jobs for car workers.

He nevertheless quotes EU Competition Commissioner Neelie Kroes as pointing out that the car and banking sectors are not comparable. "If your financial system is not working any more, then it’s over. That was our incentive to give medicine to its blood circulation."

In another Associated Press report, Raf Casert says Luxembourg's Prime Minister Jean-Claude Juncker, chair of the 15-nation Eurogroup, believes that European attitudes toward on automaker bail outs could be influenced by decisions made by the U.S. Congress on whether or not to help the Big Three. Hamburg’s Bild newspaper quoted Juncker as saying that "Europeans couldn’t just stand by idly if the U.S. government were going to spend billions of dollars to help Ford, GM, and Chrysler in the United States."