European Carmakers Can Get Government Loans
The Financial Times (FT) reports that car manufacturers’ finance arms are eligible for huge French and German bank loans approved in the past two weeks. While this isn’t a bailout per se, it does give the manufacturers’ credit operations access to some €40b worth of cash to make loans to shoppers. The FT claims that as much as 15 percent of European car manufacturer profits come from the financing divisions. Car sales in the UK and Spain are taking an old world battering, and while the loans are unlikely to affect lending in the U.S. (i.e. Mercedes will not be using the money to make loans to American buyers); this will be a major component affecting European sales and manufacturer profitability. The most frustrating part? You just know they’re going to make the money available overnight, while we’re still sitting and waiting to see what, if anything, companies like GMAC can actually get from the $700B bailout passed weeks ago. Question: is that a good thing or a bad thing?
Immensely bored law student. I've also got 3 dogs.
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I think you need to read the article again. The governments have agreed to offer the carmakers the same loan guarantees they are offering their banks but the car makers aren't interested. The $40B in soft loans the car makers are looking for isn't on offer yet, is contentious, requires EU approval (because state aid is illegal) and would come with strings (and a cost) attached.
Today, Daimler stated that it is interested in taking the money. The Dieter said sure, why not, developing hybrids is expensive. Others will follow, I am pretty confident to say.