The Swedish government today set out a Skr28bn (£2.35bn) plan to rescue its troubled auto industry, especially Volvo and Saab – owned by Ford and General Motors respectively.
This follows last night's decision by the US House of Representatives to endorse a temporary $14bn (£9.4bn) loan for America's Big Three carmakers – GM, Ford and Chrysler. The deal could yet be undermined by the Senate where it faces severe opposition from Republicans.
The Swedish scheme envisages a maximum 20bnSkr in credit guarantees and a further 5bnSkr in rescue loans for companies in crisis. The government has already set aside 3bnSkr to help the industry develop green technologies. Its move came as the German car industry demanded a multibillion euro injection from both the US government and the EU in the face of frozen credit lines.
Cash-starved Ford and GM are selling off Volvo and Saab but Sweden's centre-right government said it had no intention of taking stakes in either company. Finance minister Anders Borg said the scheme laid the groundwork for solving the real problems of the auto industry.
The Swedish and German moves, mirrored by similar efforts in France and Italy, are likely to be fiercely scrutinised by the European commission which fears the break-up of the single market through beggar-thy-neighbour national support schemes.
Neelie Kroes, EU competition commissioner, has warned that the commission will not allow a generalised bailout of auto-makers and will only approve schemes for retraining or boosting R&D.
She says demands for car-makers to be treated in the same way as banks are mistaken as the financial sector is critical to the entire economy – and its possible failure represents systemic risk.
In Germany Matthais Wissmann, head of the VDA trade body, said all companies producing cars in the US – not just US groups – should be treated equally. BMW and Daimler, makers of Mercedes, are among those which set up plants in southern states of the US to meet once-booming demand for their cars. But both have been hit by collapsing sales.
Wissmann reiterated demands for between €20bn (£17.8bn) and €40bn from the EU for R&D into green technologies, insisting the German industry wanted to lead the global competition for eco-friendly cars. German car companies, led by GM-owned Opel, are also demanding national government aid.
The French government, meanwhile, injected €10.5bn capital into the country's five biggest banks through its state stake-holding company – a scheme approved by the commission on Monday and designed to increase credits for companies, local councils and individuals.
