Sweden Sets Out £2bn Crisis Plan

The Swedish government yesterday set out a Skr28bn (£2.3bn) plan to rescue its troubled auto industry, especially Volvo and Saab - owned by US groups Ford and General Motors respectively.

The scheme envisages a maximum SKr20bn in credit guarantees and SKr5bn in rescue loans. The government has set aside Skr3bn to help the industry develop green technologies. Its move came as the German car industry demanded a multibillion euro injection from the US and the EU in the face of frozen credit lines.

Cash-starved Ford and GM are selling Volvo and Saab, but Sweden's center-right government said it had no intention of taking stakes in either. Sweden's finance minister, Anders Borg, said the scheme laid the groundwork for solving the real problems of the auto industry. The Swedish and German moves, mirrored by France and Italy, are likely to be scrutinized by the European commission which fears the break-up of the single market via national support schemes.

Neelie Kroes, EU competition commissioner, has warned the commission will not allow a generalized bail-out of vehicle makers and will only approve schemes for retraining or research and development. She says demands for car makers to be treated in the same way as banks are misconceived because the possible failure of the financial sector holds a systemic risk.

In Germany, Matthias Wissmann, head of the VDA trade body, said all companies producing cars in the US should be treated equally. BMW and Daimler are among those which set up plants in southern states of the US to meet demand. Both have seen sales collapse.