As Ford, Chrysler and GM plead their cases for $34 billion in government bailout money, another automotive crisis appears to be looming on the other side of the Atlantic.
I thought the collapse of the auto industry in the U.S. was caused mainly by poor management and the production of gas-guzzling trucks and SUVs. That’s why I was surprised to hear that European automakers are dealing with similar challenges, and are asking their governments for $50 billion in assistance.
For example, Jaguar Land Rover, now owned by India’s Tata Motors, is asking the British government for $1.5 billion in assistance. (Why they aren’t going to India’s government is an entirely different blog topic!)
While not quite as dire as the U.S. situation, European car sales were down 15 percent in October, with the outlook for 2009 even worse. Many European carmakers are planning temporary production shutdowns and some are already reducing their workforces.
Looking a little deeper at the situation, I have to bring up this fact: General Motors has a large stake in Opel, the German carmaker. Should GM not get a bailout, Opel will probably receive help from the German government. That could create a domino effect where other European automakers perceive an unfair advantage, resulting in a major case of the ‘me-toos.’
It’s entirely possible that the European situation arose out of the politics of opportunity, presenting them with an easy way out in the form of government bailouts. It sure looks like U.S. automakers are paving the way out of the land of free-market business and into the world of government subsidies.
I believe it’s best to let the world’s strong auto companies live and the weak ones die.
But what do you think: Do the European car companies need a bailout package?