US Car Bail-Out Fails in the US Senate
A 14 billion dollar survival loan for the US car industry collapsed late on Thursday as the bail-out plan failed to get senate support, raising fears of huge job cuts and a possible industry collapse.
The failure to reach agreement in the senate has huge ramifications for Volvo and Saab cars and the Swedish auto industry as a whole, which only yesterday received a huge boost from the government in the form of a 3.4 billion dollar support package.
Volvo and Saab cars are respectively owned by America’s biggest car makers Ford and General Motors who desperately needed the survival loan to be passed by the senate.
What the senate’s ”No” means for the future of Volvo and Saab cars is unclear.
Earlier on Thursday, the Swedish government announced a 3.4 billion dollar package to help its beleaguered auto industry, including the national arms of carmakers Volvo and Saab.
The support package will go to fund increased investment in research and development in green technology as well as state credit guarantees for raising loans from the European investment bank, but the government again reiterated that it would not be buying a stake in either Volvo or saab cars.
The Swedish car industry has shed 7 percent of its workforce since June.
The package was broadly welcomed.
”We’ve talked all autumn about how important the vehicle industry is for Sweden, and so we have to see this as a victory,” said Michael Blohm, a union representative at Volvo Cars in Gothenburg.
Volvo Cars spokeswoman Maria Bohlin said the move showed Swedish politicians were willing to fight to save Swedish jobs.
At a news conference on Thursday, Finance Minister Anders Borg said the measures, which have yet to be approved by lawmakers, were taken with the ”clear assumption” that the state would not buy into any existing carmaker.
Borg said the funds would be allocated with the aim of ensuring local manufacturers’ research and development projects, as well as production, remained in Sweden.
”We will of course have considerable influence over how the money is used,” Borg told the news conference, adding the government would make sure the funds did not ”end up with the U.S. owners”.
The three-part package includes state credit guarantees totalling a maximum of 20 billion kronor ”to companies in the automotive cluster for raising loans in the European Investment Bank for conversion to green technology.”
The government will also provide three billion kronor for the creation of a state-owned limited company to conduct research and development in the automotive sector, and provide rescue loans of up to five billion kronor for companies in the sector ”that find themselves in financial crisis.”
Sweden’s car industry accounts for 15 percent of the country’s exports and, with some 700 companies and suppliers, employs about 140,000 people.