European Automakers to Seek €40 Billion in Loans from EC
06 October 2008
|Sales of personal cars are on the decline in Europe. Click to enlarge. Source: ACEA|
European automakers will approach to European Commission (EC) seeking €40 billion in loans (US$54 billion) to support their shift to lower GHG-emitting vehicles, according to Fiat CEO and former ACEA (European Automobile Manufacturers Association) president Sergio Marchionne, in interviews given to several financial newspapers at the Paris Motor Show.
The request mirrors the new program of US$25 billion in loans from the US government to domestic automakers and suppliers for retooling factories to produces more fuel-efficient vehicles. (Earlier post.)
In an interview with the Financial Times, Marchionne said that European manufacturers were unanimous in the approach to the EC.
“We will approach the European Commission for a similar idea to [that of] the US: €40bn is a good number given the bigger size of the European industry. We need a level playing field,” Mr Marchionne said. The US loan has caused concern among German carmakers such as Volkswagen. They think it could discriminate against foreign manufacturers in the US.
...Carmakers worry it will be impossible to attain the targets for carbon dioxide emissions that Brussels intends because of the economic difficulties. “We are on our knees at the moment, so if they want us to invest billions of euros, the Commission has to help us out,” one European car executive said.
Carlos Ghosn, chief executive of Renault, said before the Acea agreement he hoped Europe would follow the US. “Other governments should take inspiration from this. Why only in the US? The European Commission should perhaps do the same.”
On top of the coming push for greater reductions in GHG emissions, sales of personal cars in Europe have been decreasing. ACEA figures through September show that demand for new cars in Europe decreased by 7.3% in July and 15.7% in August, reflecting the general deterioration in consumer confidence and the effect of continuing high fuel prices. Over the first eight months of the year, new car registrations declined by 3.9% in Europe.
New registrations fell by 4.4% in Western Europe, with a decrease in Spain (-21.1%), Italy (-12.0%) and the UK (-3.8%) overshadowing growth in France (+2.9%) and Germany (+1.7%). Registrations were up 1.8% in the new EU member states, reflecting growth in Poland (+9.1%) and the Czech Republic (+8.2%) while Hungary (-4.9%) and Romania (-3.5%) were on a downward trend.
At a GM press conference at the Paris Motor Show, GM Europe President Carl-Peter Forster appealed to European politicians to help restore consumer confidence in the markets. He also called for clear, European-wide environmental laws. (GM was the fourth-largest seller of vehicles in Europe through August. Volkswagen Group was first, followed by PSA and Ford.)
Foster attributed the decline in European sales to three main factors: tough market conditions, unfavorable currency rates; and high commodity prices for metals and oils.
...for any of us to succeed, we must have customers who are willing and able to purchase new automobiles. Frankly, until consumer confidence returns, the automobile market cannot regain its momentum...We know there is pent-up demand for our Opel products. And we have local initiatives in place to spur cash sales. But our efforts are being stifled by a serious cash shortage.
...we also need help from political leaders to turn the situation around. At the EU level, and within the political leadership of individual countries, action must be taken to stimulate the economy, relieve the credit crunch and restore consumer confidence. Only then will consumers have the means—and the confidence—to invest in a new automobile.
Another uncertainty that is undermining consumer confidence and purchase intentions is the lack of clarity on CO2 policy. Stated plainly, we need action on a reasonable, results-focused, pan-European CO2 policy. Now.
...for any policy to be successful, it must enable the design and manufacture of cars that are both desirable and affordable. This is the only way we will achieve the near-term volume sales required to replace the older, high-emission vehicles currently on our roadways. Let me state this again. If the CO2 policy slows or even kills demand for new vehicles, the policy actions will have failed completely by leaving the older, higher-polluting cars on the road.
If we consider CO2 policies from this practical, results-focused perspective, it becomes clear that a successful CO2 strategy will be one that is viable for manufacturers proportional with other sectors and supported by the necessary fuel, infrastructure and taxation policies.—Carl-Peter Forster
Forster called for three main policies:
A “reasonable”, phased-in compliance schedule. (The European Parliament Environment Committee rejected a phased-in schedule in its vote in September. Earlier post.)
Policies to stimulate the early commercialization of breakthrough technologies, such as extended-range electric vehicles. GM suggests that the incentives come in the form of “super-credits” in which vehicles rated under 50 g/km count five times when calculating the manufacturer’s CO2 compliance rating.
A comprehensive plan to quickly expand the availability of biofuels.
...hey ACEA! Why don´t you drive in one of your super duper Diesel cars to the DEUTSCHE BANK or DRESDNER BANK in Frankfurt/Germany? Ask them for a loan!
But please, let us, the taxe payers alone.
Posted by: michel | 06 October 2008 at 03:36 AM
This sounds like corporate welfare on a massive scale. While it's true that the credit crunch in the US is now beginning to bite in Europe, too, pumping $54 billion directly into the continent's auto industry isn't going to help sell any cars. The demand is there, especially for smaller, more efficient models.
It's the banks that are clamming up, because they foolishly invested large sums in the US and are now forced to deleverage their positions. Therefore, like it or not, any government action should be focused on the financial sector.
Posted by: Rafael Seidl | 06 October 2008 at 06:01 AM
If they are going to invest that much, they may as well provide the electric/ hydrogen/ 2ndBiofuel infrastructure as well. Though, i generally disagree with corporate welfare on this scale. Perhaps it is time to go hard or go home with transforming the vehicles and fuel systems out there - and this type of money is what is needed to do it. Besides, government loans may mean oversight and regulations on what research gets done (not just profit-maximizing) and what gets built. Hopefully this is part of the 'Grand Transformation Plan'.
Posted by: Jer | 06 October 2008 at 06:45 AM
It's most probably not a matter of improving vehicle efficiency, but more of staying alive. The CHG argument sounds much better though :).
Posted by: Stefan Saalmink | 06 October 2008 at 07:02 AM
The Euro. banks and institutional investors had/have no
choice but to invest in the U.S., because it is the only
western economy that can produce the needed growth to
support European pension funds. The fat that the U.S.
economy is a relative wild west does not change the
fact that it is a relatively safe haven that can
provide ROI. This is sort of a major structural
flaw in that there is no way the Euro. economies (even
when humming on all pistons) can keep up with the the
growing welfare entitlements of an aging population.
The U.S. has the same entitlement problems but,
a. it is more internalized
b. the U.S. is more able to slash entitlements without
c. the U.S. has a slightly better demogrpahic outlook.
Posted by: JH | 06 October 2008 at 07:09 AM
"... there is no way the Euro. economies (even
when humming on all pistons) can keep up with the the
growing welfare entitlements of an aging population..."
There is no way you could possibly know that. PhD economists with 20+ years of specific relevant experience have been planning and debating that very issue. I doubt that anyone on this blog can have any credible 'comparable' experience or argument against that.
The US will most likely change to a more 'Euro' type of regulation environment. The end of complex financial investment instruments being used on a grand scale is over - and good riddance. Though - the likelihood of investment into auto R&D may suffer as a result - however, perhaps its best that the investment comes out of government hands not venture(vulture) capitalists.
Posted by: Jer | 06 October 2008 at 07:54 AM
More financial regulations are needed and unavoidable to keep away from further melt-down.
The ground transportation and energy sectors will need large government refunable LOANS to transition to new greener technologies. However, the lending authorities must establish strict rules and regulations to ensure that those loans don't end up in the wrong places.
Governments must receive some form of guaranteed equities (prefered shares etc) and oversight rights.
Posted by: HarveyD | 06 October 2008 at 08:42 AM
"Another uncertainty that is undermining consumer confidence and purchase intentions is the lack of clarity on CO2 policy. Stated plainly, we need action on a reasonable, results-focused, pan-European CO2 policy."
Doubtful that's coming as the science behind CO2 AGW is in tatters. I don't know a single person who would base a purchase decision on CO2 (except maybe Hanson and the IPCC handful.)
While burying a demand to match U.S. commitment to electrification of transport in "CO2 policy" - Euro car makers are asking for DOUBLE the U.S. loan package. These are exactly the steps that must be taken if the fast transition to non-fossil fuels is to be made. If government and green activists want to wait another ten years - don't support these type loans.
Right now the U.S. leads in commitment to retooling for electric/hybrid vehicles. Euro car makers WILL be left behind if they don't match that commitment. But the need to ask for twice what the U.S. has guaranteed is a bit optimistic.
At this point the battered term "CO2 policy" is a meaningless euphemism for electrification and energy independence. The sooner we all admit that, the greater support this transition will receive.
Posted by: sulleny | 06 October 2008 at 08:51 AM
CO2 from vehicles is automatically going to fall to the wayside as electrification progressively moves in.
Countries without sufficiant fuel (Japan, China, India, USA and EU etc) will benefit both ways, i.e. less fuel imports and less GHG.
Electrification of all home HVAC should be addressed concurrently for the same reasons.
Posted by: HarveyD | 06 October 2008 at 08:58 AM
hahaha i wonder who they got the idea from.... monkey see monkey do :P
Posted by: philmcneal | 06 October 2008 at 09:54 AM
You have ideological idiots requiring and mandating that the automakers make massive investments. Why? For no good scientific reason except for a increasingly discredited, non-quantitative, theory from the dark ages of mid- 20th century Science, as corrupted by political activists.
They have their emotional attachment to their new animist religion of GAIA. It's way past time to require them to pay for the expenditures that they demand, for their religion.
For way too long the sanctimonious phonies have taken the easy philosophical approach, that any thing they want, no matter how trifling the benefit, should be done not even reasonably but yesterday. Moreover it should be paid for by someone else, like the automakers or taxpayers.
When or when, will we require that the green wackos put their own money where their mouths are? They need to pay special assessments and special taxes for their green wacko ideas, and to pay for their infantile wishes?
Then they might actually think and prioritize about what they desire; and what is really needed.
Posted by: stas peterson | 06 October 2008 at 10:32 AM
Your comments about the effects of the coming Electrification of Ground Transport are spot on.
CO2, if ever a real problem except as a shortage, goes away as we convert to electric ground propulsion. Global Warming seems to have DISAPPEARED, for theh past decade with the prospects of many more decades in the future of also cooling.
The genuine problem of Petroleum availability also largely disappears too. The Oil Sheiks and Oil Commissars can go hang; we won't need them in less than a decade and half. Largely removing the oil demand for ground transport will by itself, reduce US consumption below our own domestic production, and that will be true for most of the World, too.
Then the last limit to eliminating poverty for the undeveloped world is ended too. The World of 2050 or 2100 looks very promising, for all of Mankind, despite the "official" propaganda for increasing misery. That only exists to justify taxes and more centralized political power.
Long before then the developed world will have conquered the toxic pollution and cleanup issues, as well. indeed we are but a relatively few years from declaring success, even now in the USA.
Posted by: stas peterson | 07 October 2008 at 10:48 AM
Lets hope that USA will switch to electrified vehicles before it goes broke.
How long can USA support $800B/year trade deficits, mainly due to energy (Oil, NG + Electricity) and vehicle imports + and oil wars?
A major national program to switch to partially and fully electrified (locally produced) vehicles + increased electric energy production and distribution may represent the economic boost needed to pull out of the current recession.
Secondary effects would be massive trade deficits and GHG reductions.
Posted by: HarveyD | 12 October 2008 at 10:56 AM
It is so cool that alot of kids today want to go green, and not just so they will look cool.EDH, keep up the hard work on going green.
ps-you all know me at EDH!!!!
Posted by: cool | 20 November 2008 at 11:41 AM