David Prosser: Car makers have driven a hard bargain

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The Independent Online

Outlook We may feel bitterly resentful about the huge cost of bailing out the financial sector, but you can't say many in the industry have not suffered. Tens of thousands of people – from the richest investment bankers to poorly paid cashiers – have lost their jobs, and many smaller institutions, not deemed too large to fail, have shut their doors for good.

Contrast that with the car industry. For all the talk about a crisis in the auto sector, Jaguar's announcement yesterday that it will shut one of its West Midlands factories is the first formal announcement of a plant shut-down anywhere in Europe since the recession began. And there won't be any job losses.

How have Europe's struggling car companies managed to keep their heads above water? Thanks to huge state support, that's how – from the German-led financing package for GM Europe to scrappage schemes such as the one still going in the UK.

You might think it right that taxpayers across Europe should subsidise the jobs of car workers, despite all the evidence suggesting the industry has a chronic problem with over-capacity that predates this recession. The maintenance of employment is, after all, a perfectly respectable economic objective.

Still, one can't help wondering for how long this support will have to continue – or how its cost might rise – in a world where demand for cars, particularly the larger, more profitable vehicles, is falling. Don't expect China to plug the gap – it has sensibly seen this recession as its chance to buy Western technology for its domestic car industry.

Sadly, Jaguar's announcement yesterday is likely to be the first of many. And it will probably be the last one that doesn't come with job losses.