EU reveals pounds 3bn deal for car industry to counter Japanese

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BRUSSELS - The European Commission unveiled details of a pounds 3bn subsidy package for the recession-hit European car industry to help it build market share in the face of stiff competition from Japan, writes Sarah Lambert.

Martin Bangemann, the Commissioner responsible for industry, announced subsidies designed to stimulate car production following last year's 15.9 per cent fall in European car sales - the largest on record. Sales are expected to be flat this year and the downturn will cost an anticipated 40,000 jobs in the car industry.

Up to pounds 1.4bn will be available over five years for specialist re- training through new EU financing instruments aimed at helping a workforce adapt to industrial change. Grants worth a further pounds 980m are earmarked for cross- border projects and pounds 700m has been set aside for small and medium-sized businesses, many of which specialise in components for the car industry.

The commission is also lobbying governments to approve a proposed research and development programme worth pounds 9.17bn over four years, much of which would be spent on relevant projects such as the search for clean energy technologies.

Mr Bangemann said that in principle the European industry was able to compete. 'It has a few weaknessess but the future looks rosy,' he said, and predicted that by the end of the century Europe would produce 15 million cars a year against 12 million last year.

The commission is considering whether to prolong an exemption to EU competition rules which allows manufacturers to use selective distribution networks.