EU Ready To Euthanize Carmakers

Bertel Schmitt
by Bertel Schmitt
eu ready to euthanize carmakers

Europe has an abundance of car makers. Apparently, Brussels is preparing the populace for less. As EU business ministers gathered in Brussels to discuss support for the flagging industry, as French manufacturers lobby their government for aid, European Union industry commissioner Guenter Verheugen said some European carmakers face an uncertain future.

“There is no guarantee that all the main European manufacturers can survive the crisis,” Verheugen told BBC radio. Translation: don’t bank on a bail-out. If you get in trouble, you’re on your own. There’s surely BIG trouble ahead; Verheugen forecasts a further 20 percent drop in sales in 2009. He said the industry’s outlook was “to say the least, brutal,” as cash-strapped consumers defer big-ticket purchases.

Note the emphasis on “main European manufacturers.” If the main ones aren’t sacrosanct anymore, then it’s open season for the smaller ones. In the world according to Verheugen, China soon will have a lot of established brands to choose from.

According to Associated Press via Toronto’s Globe And Mail, Verheugen insists that the 27-nation bloc will not alter the global car market by funding overproduction.

“We have no intention to distort competition. We have no intention to allow a race for subsidies,” Verheugen told reporters. “There is no free ride for the member states and nobody asked for that.” Guenther Verheugen is a citizen of Germany, home of the largest number of European car manufacturers, which holds a 47 percent share of Europe’s car market.

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  • Chalmers Chalmers on Jan 19, 2009

    None of the French automakers will go under for wont of government subsidies...Cher Monsieur Sarkozy has time and again proven that "the national good" overcomes the market solution (see: Sanofi-Aventis, Alstom, etc). The EU government is a convinent thing when it comes to tax time (w00t! a new tax that pays to throw away the new product I just bought...w00t! a tax on blank CDs...), but they can stay the f--k out of the business of national business.

  • K.amm K.amm on Jan 19, 2009

    "Jack Baruth : January 18th, 2009 at 9:31 am In other words, the biggest welfare states in the world have plenty of stomach for endlessly funding bored twenty-somethings who refuse to work," I'm from Europe - left in my twenties - and I never heard of such thing... is this another "American comment" about Europe? There's help for the unemployed, yes. Just like here, in many states, it's designed to help the neediest people, who are out of work etc. It's not a lot of money but helps - as a matter of fact US programs have helped some 5-10M people since the 1996 welfare reform. But hey, why stop at bashing unemployment welfare? Guess what, there's more: those nasty Europeans have universal healthcare systems - based on private providers, mind you - that usually works far better than ours, way more effective yet cost 2/3rd or half of what we pay for ours (in % of the GDP) even though they usually cover everybody over there unlike the US parasite-feeding (HMO) "system" (hah, like if there's any system here!) which left 40-50M people without coverage by now. "but helping out productive companies is too much to ask." Just like the most loudmouthed market-capitalists did here, in the US? Let's help "productive" companies - companies who make crappy products nobody wants to buy because they look ugly or they are low quality or they are very costly not only to buy but even more so to own (or all of these)? "This is why Asia is winning the economic war, right here." You mean those countries with subsidized/socialized healthcare, public education (and in some cases with limited civil rights)? Those Asian countries, you mean, the ones who largely rely on their US sales/exports? I often wonder what on Earth they teach in US schools...

  • K.amm K.amm on Jan 19, 2009

    "Answer to Dr. Lemming: 1.) The EU has very strict rules when it comes to straight subsidies. They are, basically, against EU law - with some exceptions. Changes would need the vote of all member states - good luck to get the votes from states with no domestic car industry. If a member state ignores the rules, they might (most likely will) be challenged. 2.) There are grumblings that the EU is preparing a WTO case against the U.S. because of the Detroit subsidies. If the EU subsidizes, no chance of winning. If they keep their nose clean, big trouble." Well worded - national govt's can do a lot of things but none can openly disregard EU laws, period.

  • K.amm K.amm on Jan 19, 2009

    BTW it's today's news: France readies car industry rescue plan January 20, 2009 - 12:09AM France could take stakes in struggling car makers, the industry minister said, on the eve of a key meeting to agree a financial rescue plan for the industry. Facing collapsing demand, Renault, PSA Peugeot Citroen and their suppliers have dramatically cut production and shed thousands of jobs as they struggle to stay afloat in the global economic downturn. Industry Minister Luc Chatel told Le Figaro newspaper that several options were under consideration to save a sector that directly or indirectly employs 10 per cent of the French workforce. "Carmakers do not necessarily need capital, but in exchange for our financial support, an increase in capital could in some cases be a good trade-off," said Chatel said in the interview. President Nicolas Sarkozy last week said the state was ready to "mobilise lots of money" to shore up car companies that opt not to relocate their factories and jobs outside France. On Tuesday, Prime Minister Francois Fillon will join executives from car manufacturing companies and suppliers along with union leaders for a meeting to agree on a broad plan dubbed a new "auto pact". A 300 million euros ($A591.66 million) restructuring fund will be formally launched and a broader rescue package is to be unveiled in late January. Le Parisien newspaper reported that the overall plan could total between five and 10 billion euros ($A9.86-$19.72 billion). "We are looking at all options," said Chatel. "But the big question is what do we get in return." With car production in France down by 10 per cent in the first nine months of 2008, companies are under fire for running factories abroad: Renault's popular Twingo is built in Slovenia and the Peugeot 107 city car in Slovakia. "Yes the situation is serious," he said. "The sector today is facing a two-pronged problem of demand and financing, and also a structural challenge in terms of competitiveness." France, which already owns a 15 per cent share in Renault, is also warning carmakers to forego paying a dividend to shareholders if they expect taxpayers to fund state assistance. Other measures being weighed include soft loans and loan guarantees. Finance Minister Christine Lagarde on Friday made the case in Brussels for relaxing the European Union's strict rules on state aid to help the industry adapt to demand for more environmentally-friendly models. But the European Commission has warned against unleashing a "race for subsidies" by governments in half a dozen EU countries where the automobile industry is in dire straits. Europe's second biggest automobile sector after Germany, France's car companies and spin-off industries employ 2.5 million people. Japan's Toyota, American giant General Motors and Germany's Daimler AG all have plants in France and may be eligible to tap into the state assistance, said Chatel. After bailing out banks to the tune of 40 billion euros ($A78.89 billion), the French government has repeatedly said it will take measures to prevent the auto industry from becoming a casualty of the economic slowdown.