Britain’s carmakers are to make their first appeal for direct financial help from the Government, new reports have claimed.
The move came as auto manufacturers in the United States and Japan made further steps to try and offset the problems caused to their industries by the deepening economic crisis.
Reports yesterday suggested that British manufacturers could go cap-in-hand to the Chancellor requesting assistance in the form of cheap loans to help their finance arms and contribute towards a restructuring of their production operations.
Such a move marks a departure for the UK industry although bailouts are now becoming commonplace in the US.
British companies are thought keen not to be seen as begging for help and any assistance requested would be similar to the emergency bridging loans Business Secretary Lord Mandelson announced on Friday, where viable SMEs could be eligible for loans up to £250,000 to tide them over for six months when hopefully their finances will have improved.
A senior industry source quoted yesterday said: “We are not asking for subsidies for a dead-end sector. We are asking for help to tide a healthy industry over an unprecedented period of turbulence.” In the US, General Motors has been telling government officials that a bankruptcy filing by the automaker would set off a chain reaction hitting hundreds of its suppliers and dealers as well as its Detroit rivals.
The Wall Street Journal claimed that GM’s bailout lobbying effort in Washington was reaching out to congressional leaders, the outgoing Bush White House and members of the transition team of President-elect Barack Obama, with meetings going on over the weekend.
Central to the campaign is the idea that a bankruptcy filing by GM would trigger a domino effect, potentially crippling the nation’s industrial base, the newspaper said.
Detroit automakers have sought emergency assistance to help them survive a steep and worsening drop in sales that they blame on the global credit crisis and slumping economy. GM has said it could run out of cash by early next year.
Democrats are proposing a bailout of distressed automakers through $25 billion in loans from the Treasury Department’s $700 billion corporate rescue program.
The White House opposes that move and says that $25 billion already appropriated for loans to make automobiles more fuel-efficient should be accelerated.
According to the newspaper, GM is arguing that bankruptcy would threaten jobs and the government’s pension-benefit insurance arm, which covers millions of workers outside the auto industry, by swamping the fund and further burdening a strained federal budget.
In Japan, reports claimed that Toyota, the world’s biggest automaker, was expected to slash its global sales plan for 2009 to below nine million vehicles, down at least seven per cent from its previous forecast.
The reports claimed sales would probably continue to deteriorate next year as the slump in vehicle demand spreads from the west to emerging markets.
Toyota, which this month reduced profit forecasts for this business year, has said it will announce updated sales projections at a conference next month.