Yesterday, the Financial Times reported on the worldwide auto industry. This article points out that virtually every government with an auto industry has stepped in or is stepping in to prop up the industry, recognizing that auto purchases have significantly slowed as a result of the worldwide credit crunch and the accompanying rapid rise in unemployment.
While the fate of General Motors, Chrysler and Ford Motor took centre stage, shares of European and Asian motor stocks fell on worries that the collapse of a US carmaker could have a knock-on effect on their suppliers and on broader consumer confidence in the world’s largest car market.
Toyota, GM’s top-selling global rival, which has seen its US sales plummet this year, warned that the failure of a US carmaker would have knock-on effects on its own business.
“The US auto market is shrinking rapidly,” Toyota said. “A major bankruptcy would exacerbate an already difficult environment for Toyota and the industry. We hope to avoid this situation.”
As Washington deliberated over whether and how to help Detroit, the problems in US carmaking showed signs of becoming a global problem. “The only government not helping right now is the US,” GM said.
Sweden and Brazil this week became the latest governments to step in with aid for their car industries, which have been threatened by the general global downturn in car sales this year and the US carmakers’ problems in particular.
On Thursday Sweden’s government stepped in to shore up the sector with SKr25bn ($3.1bn, €2.3bn, £2.1bn) of loans and guarantees after GM and Ford said they might sell Saab and Volvo, their respective Swedish brands, as part of restructuring plans. The centre-right government resisted calls to buy direct stakes in Saab or Volvo.
Brazil on Thursday announced a temporary reduction in industrial production taxes for the car sector until March, adding to R$8bn ($3.4bn, €2.5bn, £2.3bn) already approved to prop up automotive lending. On Friday the governor of São Paolo, where much of Brazil’s car industry is based, said he would provide R$1bn in finance to support the state’s parts suppliers.
In Germany, GM’s Opel unit asked for more than €1bn ($1.3bn, £900m) of state guarantees from the federal government and those of states where it has plants.
In Poland, where GM makes Opel’s Astra and Zafira models in the city of Gliwice, carmakers and suppliers have asked the government for loans from state banks, tax cuts, and a fund that would pay part of the salaries of workers laid off during the crisis.
It’s time Republicans and the American people wake up to the realities of what is happening worldwide. The entire world is affected by what is occurring in our own economy…and every auto maker and parts supplier worldwide fears the loss of the Big 3.
Americans, it’s time to really become patriotic and contact your Congress people to let them know that America needs the Big 3 to survive right now. Neither we nor the world, at this critical time, can afford to let them dissolve into bankruptcy.