Every Little Bit Of Car Industry Continues To Get Bailed Out

“Bailout” has gone from pootling around the periphery of our general lexicon to being invoked every single day in a familiar sing-song chime. BAIL_OUT!

And ringing in this new week? Well, the ENTIRE automotive industry.

Suppliers of car parts, who have obviously been feeling the knock-on effects of car companies slowing production, are to request $10bn-worth of TARP funds in the US; last year 40 automotive companies, many of them suppliers, filed for bankruptcy protection. And the car parts pain continues in Germany, where Continental and Schaeffler are both asking the governments in their home states for help with their combined debt of €22bn. Of course if you happen to supply Porsche, you’ll have already been conspicuously bailed out by their CEO Wendelin Wiedeking, who recently took the opportunity to turn the plight of suppliers into a tidy bit of positive spin for himself.

Governments are also bailing out workforces. Japanese workers at Mazda and Mitsubishi are to have their earnings propped up by government aid while the companies slow down production; companies must pay at least 60% of wages on days when shifts are cancelled, and the government will be funding at least half of those sums. European companies, like Daimler, Bosch and Cartier, are using similar schemes to prevent redundancies during this hopefully short period of reduced production. 

Not joining the party though are Canadian GM and Chrysler, who refused the government loans extended to them last week, surprising given the lust for cash displayed by their American counterparts. But UK car companies will get the bailout they’ve been waiting for this week, as Mandy announces on Wednesday his plans for the industry. In short, companies will be able to access credit from the Bank of England to fund attractive financing deals for new customers.

So what of the green New Deal promised by Brown, Cameron and Obama? The Telegraph reports that some of the UK bailout money will go on “grants for ‘green’ research and development”, while the FT says that “Obama’s government is also studying other measures that could help parts suppliers over the longer term, including support for research and production of advanced batteries”. While the electric car could be the New Deal for the auto industry (just as long as Bolivia, with half the world’s lithium, doesn’t squeeze everyone trying to make electric car batteries too tightly), it all still sounds suspiciously vague – let’s hope it doesn’t get swept under the carpet amid the clamour for short-term solutions.

Posted by Ben Beaumont-Thomas in Hot Money | January 26, 2009 2:22PM |