Is Daimler Getting a Hungarian Government Handout? Bailout?

Justin Berkowitz
by Justin Berkowitz
is daimler getting a hungarian government handout bailout

Despite the five-week holiday Daimler said its German workers will get this winter, the firm is still going ahead with plans to build a €800 million factory in Hungary. The factory is, according to Reuters, meant for “compact cars,” though what they’d be I have no idea. Smart doesn’t need any more capacity (a previous attempt to expand the smart brand was a dismal failure). It’s not as though the expensive A- and B- Class Benzes are flying out of showrooms, either. The original plan: build four compact models at the Hungary plant, including an off-roader, cabrio, coupe, and small van. But that was in June, before everything went to hell. And Mercedes changes its product plans on a weekly basis, anyway. The bigger story is how much the Hungarian government is contributing to the deal, whether in the form of tax credit or just direct subsidies. Hungary’s economy has been in seriously deep trouble in the past six months, with the currency in freefall and interest rates at 11.5 percent in an attempt to help the currency. Just this weekend, the IMF scrambled to bail out the country (this was after the European Central Bank gave Hungary’s central bank an emergency €5 billion line of credit earlier this month). With all this in mind, Hungary’s officials are probably looking to the Mercedes factory as an economic blessing, and Mercedes is likely cautiously optimistic about the low value of Hungary’s currency.

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  • Menno Menno on Oct 27, 2008

    Funny, isn't it, how a nation which is in the midst of a huge self-inflected financial crisis has a wealthy Germany car company standing there, hand-out, asking for taxpayer monies to build a plant. And then in addition to the United States and Volkswagen, we see Daimler doing the same thing in Hungary.

  • Hal Hal on Oct 28, 2008

    The amount of aid/incentives EU countries can hand out to individual companies is tightly controlled. Low wages and taxes, location, good infrastructure and well educated labour make Hungary an attractive place for Germans to invest. The CEO of FIAT is on record about the economics of building factories in the US, the subsidies & tax breaks on offer aren't matched anywhere else.