Monday, December 8, 2008

Automakers in other nations get more government help

Requests for aid made worldwide


Only in America are automotive companies being subjected to the disdain displayed by Congress and the country in recent weeks.

Foreign governments generally provide broad support to their home-based auto companies, which employ thousands.

In Europe, Japan and elsewhere, the governments usually provide health care coverage for workers, and in some cases, they even own a stake in their auto companies.

So it's little surprise that automakers around the world are also poised to receive additional government assistance during these tough times.

"There is no way that France, Italy or Germany would let their auto industries disappear for lack of government help," said Paris-based veteran automotive journalist William Diem. "European countries are not afraid to invest in the industry."

In the United States, however, congressional leaders criticized domestic automakers and have engaged in furious debate over whether to provide the industry with $34 billion in loans to help it survive the worst industry conditions in 26 years.

Experts say foreign countries don't shy away from directly funding their automotive companies.

"Other countries are totally different as to how they treat their auto industries," said George Magliano, director of automotive research for Americas at Global Insight.

Everyone needs help

While auto sales in the United States have been crushed to their lowest levels in 25 years -- hurting domestic and foreign sellers alike -- sales also are plummeting globally and are expected to get worse.

In response, automotive companies around the world are asking for government assistance, either through direct funding or through tax or regulatory policy breaks.

"It is quite broad and widespread," said Stephen Collins, president of Automotive Trade Policy Council, whose Washington-based group represents the Detroit Three.

In Canada, GM, Ford and Chrysler are all seeking assistance. In Sweden, Volvo and Saab have asked for aid. General Motors' Opel division is asking for funds from Germany.

Portugal and France have announced plans to craft aid packages for car and parts makers operating in their countries.

Other companies seem situated to receive assistance if they need it from their government owners. Lower Saxony, a state in Germany, is a 20% shareholder of Volkswagen AG. France, meanwhile, owns about 15% of Renault SA.

Even Chinese automakers are now asking for government aid to deal with the global credit crunch.

"I believe pragmatic Asian governments, faced with Detroit's current crisis, would have ... acted decisively to help the auto industry," Desmond C. Wong, president and chief executive officer of Sino Strategies Group LLC, a consultancy, said in an e-mail to the Free Press.

Boost for fuel efficiency

Foreign automakers also seem to get more assistance for research and development than domestic automakers.

The European Automobile Manufacturers Association asked the European Union on Oct. 29 for 40 billion euros, about $50 billion, in a low-interest loan package "to help secure a sustainable market for current and newly developed fuel-efficient technologies."

Diem said that request was initially rejected, but is once again under consideration.

The European Union also has set aside $6.3 billion of a $252-billion general economic stimulus package for the 27-country union to help European companies make cleaner cars.

Mark Fulthorpe of CSM Worldwide predicts that if Congress does provide funding to the Detroit Three, the European automakers are likely to get some portion of the 40 billion they have asked for.

During testimony in front of the House Financial Services Committee on Friday, GM Chairman and Chief Executive Officer Rick Wagoner pointed out the advantages that Japanese automakers have had in the development of batteries for hybrid vehicles.

"It's not a coincidence that the leadership in battery technology today" is in South Korea and Japan, Wagoner said.

U.S. Sen. Debbie Stabenow, D-Mich., provided similar testimony last month during a Senate Banking Committee hearing.

"The reality is we have our companies competing against countries who pay for research, countries who pay for health care, countries that fight for their industry on trade agreements," Stabenow said.

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