Automakers plead for help- markets fear sectors collapse

WASHINGTON (AFP) - US and European automakers, warning that their industry was now imperiled by the global economic meltdown, appealed for government help and sparked sharp falls on jittery stock markets Wednesday.

Automakers in the United States, Britain, Germany and Italy sent out distress signals, intensifying fears of huge job losses and a prolonged and painful recession.

Their appeals for help amounted to the opening of a second front, after the financial sector, as the credit and financial crisis accelerates towards recession.

"The auto industry is related to many other industries and the negative impact (of its possible collapse) on employment is unfathomable," said Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corporation.

The heads of the fabled US "Big Three," General Motors, Ford and Chrysler , were to return to Congress, hats in hand, after warning lawmakers Tuesday the US economy faced a "catastrophic collapse" if the government did not come through with 25 billion dollars in loans needed to keep their businesses afloat.

"What exposes us to failure now is the global financial crisis, which has severely restricted credit availability, and reduced industry sales to the lowest per-capita level since World War II," GM chairman Rick Wagoner said.

In Britain the Society of Motor Manufacturers and Traders (SMMT) and the Retail Motor Industry Federation called on the government to take measures to shield the British automotive sector from a credit squeeze.

It appealed for "national arrangements" to allow manufacturers and suppliers access to loan facilities, including "potential government guarantees."

"The motor industry faces a set of unprecedented market conditions," said Paul Everitt, SMMT chief executive, adding that "urgent action" was needed to boost demand.

"The dramatic falls in demand for new vehicles in the UK, Europe and around the world, combined with the limited availability of funding and liquidity now puts at risk valuable industrial capability."

German carmaker Opel, a division of General Motors, is to cut production next year and is mulling a 30-hour work week, directors told the Frankfurter Allgemeine Zeitung newspaper.

"We are getting set for tough times and revising lower by around 10 percent our (output) volume forecasts for 2009," Hans Demant said.

Opel has already asked the German government to guarantee loans it might need if the US parent group goes bankrupt, and Chancellor Angela Merkel has said she will make a decision on the request before the end of December.

Meanwhile a solar-panel company offered 1.0 billion euros (1.26 billion dollars) for Opel.

European Union Industry Commissioner Guenter Verheugen said the exceptional circumstances in which German automaker Opel finds itself justified "exceptional measures."

Opel's problems are "solely caused by the crisis situation at General Motors in the United States," the German commissioner explained during a debate in the European Parliament in Strasbourg.

"I think these are exceptional circumstances which do not apply to other European constructors and which justify consideration of exceptional measures," he added.

In Milan the head of Italian auto giant Fiat, Luca Cordero di Montezemolo, insisted that Europe now had "find a means to stimulate the automobile industry," which "represents a significant part of the continent's gross domestic product."

Japan's Nissan Motor chief executive Carlos Ghosn meanwhile signalled that his company was likely to make "zero" profits in the second half of the current fiscal year.

"We have to recognise 2009 will be one of the most challenging years for our industry and the whole economy in the last 50 years," he told the Wall Street Journal.

European stock markets were well into negative territory by mid-day Wednesday on what analysts said were fears that the US auto industry could fail.

The London FTSE 100 index was down 1.58 percent while the CAC 40 in Paris had fallen 1.27 percent and the Dax in Frankfurt 0.99 percent.

Tokyo on Wednesday closed down 0.66 percent, Hong Kong fell 0.77 percent and Sydney dropped 0.7 percent. Shares in Shanghai, however, surged 6.05 percent at the close as bargain-hunters bought up energy stocks.

"A strong sense of caution lingers," said Motoki Ichikawa, investment information chief at SMBC Friend Securities in Tokyo.

"The market lacks a clear direction," he said, adding investors were watching for additional economic stimulus measures in the United States as well as a possible rescue for General Motors, Ford and Chrysler.

"Investors are increasingly wary about the situation because the likely aftermath would be significant if the (US) carmakers collapse," Yukio Takahashi, market analyst at Shinko Securities, told Dow Jones Newswires.

One bright spot in the relentless fog of gloomy economic news was provided by Kenichi Watanabe, chief executive at Nomura Holdings, Japan's top brokerage, who said a global liquidity crisis appears to have passed.

"The liquidity crisis in the financial world is over. The next step is how to rebuild the real economy," he told reporters.

"This of course involves each country's fiscal spending," he said.

"People are paying attention to how respective governments gun their engines," he said in reference to world leaders pledging at the recent G20 summit to galvanise economic growth.