Britain rolls out $3.2-billion rescue package for automakers
Britain unveiled a rescue package worth up to $3.2 billion for its beleaguered car industry Tuesday but conditioned some of the assistance on efforts by the automakers to become more environmentally friendly.
The government announced that it would guarantee $1.8 billion in loans from the European Investment Bank to British-based car manufacturers and major suppliers. It pledged an additional $1.4 billion in state loans for investment in “greener” vehicles that would keep Britain on the cutting edge of automotive innovation amid growing concern about global warming.
Pressure for a rescue plan had been building since Washington agreed to assist General Motors Corp. and Chrysler and as demand in Britain for new cars continued to fall sharply. But officials were careful to avoid calling the new loan package a bailout to stave off criticism that the government was acting, at public expense, to save one industry while others were also suffering.
“There is no blank check on offer, no operating subsidies,” Peter Mandelson, the Cabinet secretary for business, told lawmakers. “We are committed to ensure that anything backed by the scheme offers value for taxpayer money.”
Mandelson said that carmakers were an important regional employer in Britain and remained competitive against rivals in the European Union and elsewhere, but that the industry was also at “the front line of the downturn, with output falling faster and further than any other sector since the summer,” making it necessary for the government to step in to “prevent an irreversible loss of capacity, skills and technology.”
The figures are indeed grim.
Car manufacturers in Britain reported a 47.5% decline in production in December compared with the same period a year before. This month, Nissan announced that it would eliminate 1,200 jobs at its plant in the British town of Sunderland.
Some car companies have put their workers on furlough for long spells; others are considering three-day workweeks as a way to forestall layoffs.
Paul Everitt, chief executive of the Society of Motor Manufacturers and Traders, welcomed the rescue package.
“This is an important announcement that recognizes the strategic contribution of the motor industry and follows action in other EU member states, the U.S. and Japan,” Everitt said.
But some union activists had wanted more, noting that other European countries had offered bigger bailouts to their automotive sectors. The opposition Conservative Party dismissed the new package as “pretty small beer” and blasted Prime Minister Gordon Brown’s Labor government for taking so long to act.
“This package is part of the government being behind the curve, too late, not responding to events that are deteriorating by the week,” said Kenneth Clarke, the Conservative spokesman on business affairs. “Sales of cars in this country have dropped by a half whilst the government dithers.”
The state loans will be aimed at research and projects to turn Britain’s automotive sector into a “low-carbon” one. Mandelson said that the global car industry is “at a turning point” as governments and consumers make louder demands for more fuel-efficient cars and electric vehicles.
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