Car bosses plead for help from Chancellor

Saab approaches Swedish government with scheme to spin out of beleaguered GM
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Pressure is growing on the Chancellor of the Exchequer to stop “dithering” and help the ailing automotive sector as Saab yesterday joined the ranks of Europe’s car giants devastated by the global recession.

Car production in the UK was 58.7 per cent lower last month than in January 2008, and commercial vehicle production was down by 59.9 per cent, the Society of Motor Manufacturers and Traders (SMMT) said yesterday. The industry group wants an emergency meeting with Alistair Darling next week to break the deadlock over proposals for demand incentives, wage support and finance schemes to support devastated automotive companies.

Paul Everitt, the chief executive of the SMMT, said: “These proposals all cost money, so they are sitting with the Chancellor. The frustration is that he is not saying they are not necessary or that they wouldn’t make things better, only that he hasn’t decided.”

More than 1,300 automotive jobs were slashed in the West Midlands alone this week as BMW reined back Mini production and GKN, the global components maker, retrenched. Behind the well-known names, the Birmingham Chamber of Commerce estimates that two smaller companies are going bankrupt every week, putting 1,000 people out of work. “The Government can’t go on dithering,” said Jerry Blackett, the chief executive of the chamber. “The West Midlands’ car industry is drip, drip, dripping away.”

Meanwhile, in Sweden, the Saab management started proceedings to spin the marque out of GM, its struggling American parent group, which has already taken $13.4bn (£9.3bn) from the US Congress and says it will need another $9.1bn.

This week the ructions spread to its European operations. Alongside the announcement of 47,000 jobs losses worldwide, GM also wants $6bn from non-US governments including those of Germany, Sweden and the UK.

Warnings that Saab would become bankrupt within the month without state aid met an unequivocal rejection of nationalisation from Stockholm. The plan now is to restructure Saab and float it as an independent company. Although the proposals include no explicit request for government money, there is the implication that future options of state aid would make for a more attractive investment proposition. The appointment of a representative from the Swedish court to oversee the process is expected within days, but the government’s final decision on the plan will take between three months and a year.

Professor Garel Rhys at Cardiff Business School’s Centre for Automotive Industry Research says the proposal is a tactic to force the Swedish government to nationalise the car-maker. “Saab simply is not a viable business, and it never has been,” Professor Rhys said. “In these negotiations it will be a case of who blinks first. If the Swedish government is presented with a proposition of liquidation by 1,000 cuts then public opinion, the unions and the politicians will all say they have to look again.”

As if Saab’s problems were not enough for GM, it is asking the German government for €2.6bn (£2.3bn) to bail out its Opel division. And in the UK, the group’s Vauxhall brand is under the spotlight after the Unite trade union warned of the imminent closure of an unspecified car factory, endangering 100,000 jobs. Vauxhall-bashers claim that Ellesmere Port is its most marginal plant, and that as the Astras made there are also produced in Belgium and Germany it could be closed with little impact on GM.

However, the facility just spent £80m on training for its workers to produce the new model Astra from the end of this year. But the UK Government is also lined up to sweeten the plan to start production of the new version in this country, a common practice within European state aid rules.