Auto Industry Bailout
December 20, 2008
Zurich-based GM Europe said the aid package announced on Friday, Dec. 19, would help stabilize the global auto industry, but added that European carmakers, itself included, would still seek emergency support from governments.
"While we are grateful that the US government has decided to back its auto industry, aggressive work continues here in Europe to align the business with the significant downturn in the market," GM Europe said in a statement.
"We are continuing our discussions with key European governments, such as Germany, about accessing credit lines on an expedited basis and expect to successfully conclude these discussions early in the new year," the group said.
GM's European brands include Opel in Germany, Vauxhall in Britain and Saab in Sweden. GM also markets its Chevrolet brand in Europe.
Germany backs loan
The German government greeted the US auto loan positively, confirming through its Economy Ministry that talks with GM's German unit Opel would resume early next year. Opel became the first European carmaker to seek a government bailout when in November it asked Berlin to back up loans valued at around 1 billion euros.
"This is a welcome breathing space for GM," an Economy Ministry spokeswoman said Friday. "For Opel, it is still the case that talks will continue at the start of the coming year and we will take into consideration the developments in the US."
German Chancellor Angela Merkel has expressed concerns over the possibility that funding by her government for Opel could seep over to the carmaker's US parent company GM.
In the UK, GM Europe said Friday it would be seeking government assistance for its Vauxhall unit "within days."
But British business secretary Peter Mandelson said Wednesday, Dec. 17, that Downing Street would not support or run failed companies. "I don't have an open check book," he said.
Collapse of automakers unacceptable: Bush
In the US, tough conditions have been attached to the federal funds announced Friday. GM and Chrysler will have to prove they can return to viability or the money could be withdrawn again by March 31, likely leaving no option other than bankruptcy for the two auto firms.
The loan provides GM with $9.4 billion and Chrysler with $4 billion over December and January. GM could get another 4 billion dollars in February.
"In the midst of a financial crisis and a recession, allowing the US auto industry to collapse is not a responsible course of action," US President George W Bush said in a statement at the White House on Friday.
GM and Chrysler, who had warned they faced collapse without access to federal aid, welcomed the government's decision and promised to use the funds to enact the painful restructuring moves demanded as a condition for the loan.
Auto funds drawn from bank bailout
The funds will come from the $700-billion financial rescue package approved by Congress in October, after attempts to provide the car industry with a separate aid package were blocked by Republican legislators last week.
Bush had previously refused to use funds from the financial rescue package, but said Congress' failure to act had left him with no other choice.
Meanwhile, the outlook for a near-term recovery in global auto demand dimmed as Europe saw a record fall in truck sales in November, with deliveries down 28 percent from October, the European Automobile Manufacturers' Association (ACEA) said in a statement Thursday, Dec. 18.
The ACEA also reported that new car registrations had slumped in November by more than a quarter compared to the same month last year. It was the seventh straight month of decline in car registrations.