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Business

Euro Zone Automakers Call for Help as Credit Crunch Continues

Euro zone leaders say they are working together to coordinate an aid package for European carmakers hit hard by the financial crisis.

Opel factory in Bochum, Germany

European carmakers such as Opel insist time is running out

Luxembourg's Prime Minister Jean-Claude Juncker, who heads the group of 15 countries that use the euro, said Monday, Nov. 10, that efforts to defend Europe's car industry would resemble in some way the expected US approach to its own auto sector crisis.

European governments "can't avoid seeing what the Americans are doing" and could not afford to let Europe's automobile sector "disappear," Juncker told Radio France Inter.

Calls for subsidized low-cost loans

The efforts come as German carmakers look to Chancellor Angela Merkel's government for signs it will provide further relief for its embattled auto industry.

US flags fly outside of General Motors world headquarters in Detroit

GM has warned it is slowly running out of operating cash

German carmaker Opel has asked for tax incentives for new car purchases, the introduction of low-cost consumer loans and a bonus for taking cars more than 10 years old off the road.

The automaker said around $52 billion (40 billion euros) would be needed to set up and finance the low-cost consumer loans which could be managed by the European Investment Bank.

The requests were made only a week after the German government said it would implement a series of support measures including cancelling the road tax for new car owners for one or two years.

"The measures presented are a first step but are not enough to underpin demand for new cars by families with weak or modest incomes," said a letter sent Friday by Opel chief Hans Demant, works committee head Klaus Franz and General Motors (GM) Europe boss Carl-Peter Forster.

Opel is a subsidiary of US auto giant GM, which itself is facing one of its worst years to date due to decreased sales, job cuts and the credit crunch.

GM issued a stark warning Saturday insisting it was running out of the minimum amount of cash it needed to operate until the end of the year after posting third-quarter operating losses of $4.2 billion.

Ford, the second largest auto firm in the US, also reported substantial losses and said it would cut 10 percent of its North American labor costs, which equates to substantial layoffs. The carmaker said it had lost $129 million in the third quarter of 2008.

US leaders appeal for auto aid

Rahm Emanuel, left, with President-elect Barack Obama

Rahm Emanuel, left, and Obama have made clear their desire to help out US carmakers

US congressional leaders Saturday joined President-elect Barack Obama in calling for support for the ailing US auto industry, sending a letter to Treasury Secretary Henry Paulson to tap money from the government's $700-billion financial rescue package.

"A healthy automobile manufacturing sector is essential to the restoration of financial market stability, the overall health of our economy and the livelihood of the automobile sector's workforce," said Speaker of the House of Representatives Nancy Pelosi and Senate Majority Leader Harry Reid.

On Friday, Obama called the auto industry the "backbone of American manufacturing," signalling his intention to help Detroit under his presidency, which begins Jan. 20.

"Washington needs to look at fast-forwarding the $25 billion that has been provided for retooling the factories for basically a more fuel-efficient auto fleet," said Obama's chief of staff, Congressman Rahm Emanuel, referring to an aid package recently authorized by Congress for the car industry.

But automakers have asked for more help, insisting they need another $25 billion -- on top of the aid package for improving fuel efficiency -- to stave off what they say could be their imminent collapse.

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