Top politicians are lining up to proclaim that Vauxhall/Opel isn’t worth saving. Which is mortally wounding for the company because without billions of cash from European governments, it will go bankrupt within weeks.
Vauxhall/Opel has said it needs £3bn state aid in Europe. That’s in addition to the plea by its American parent for eight times that much from the US Government.
But in Germany, chancellor Angela Merkel has said that the car industry is not ‘systemically vital’ to the economy, whereas the banks are. So they’ll save the banks whatever, but the car business can go hang.
Then she said that she isn’t convinced that even if Opel/Vauxhall gets the state aid, that it will be a long-term viable business. In other words, she doesn’t want to be asked for more later, and have to throw good money after bad.
In Britain, business secretary Peter Mandelson announced £2.3 billion of aid for the car industry weeks ago. But he still hasn’t given as much as tuppence of it away.
He’s highly resistant to the one thing that would get car sales going fast, a ‘scrappage scheme’. This is a cash bung to people who scrap an old car and buy a lower-polluting new one. As has been shown in Germany and France, such a scheme would sell a huge number of new superminis.
So what’s the political agenda here? I wonder if a cruel calculation hasn’t been made. The politicians don’t want hundreds of thousands of extra unemployed on their hands. But they also know a prominent truth about the motor industry.
There are simply too many car factories in Europe for the number of car buyers. Over-capacity, it’s called, and it’s been a problem for decades. Now, if one major manufacturer topples over, the remaining car-makers will be able to keep their factories busier.
It’s like cutting off a gangrenous limb to save the patient. If Vauxhall/Opel dies, the rest of the European industry will be healthier. And need less subsidy. Meanwhile the tax take from drivers – in terms of new-car tax and fuel tax – wouldn’t fall at all.
Is this the logic behind the political grandstanding?