Sweden to Come to Rescue of Saab and Volvo

The automobile industry in Sweden accounts for 15% of the country's exports.

Sweden will come to the rescue of its U.S.-owned carmakers crippled by the financial crisis, Saab and Volvo, to secure the future of an automobile industry which accounts for 15% of exports, officials say. "Of course the Swedish government is committed to supporting the carmakers. We can guarantee that we will have car manufacturing in Sweden because it is an important part of our economy," Frank Nilsson, a spokesman for the enterprise and energy ministry, said.

Volvo Cars' owner, Ford, said on Dec. 1 it was considering selling the marque given the challenges facing the U.S. auto sector, clouding the future for the Swedish brand. But no matter who ends up as the owner, the government is committed to supporting the industry, well aware that Volvo and Saab and their hundreds of suppliers are "big employers" in Sweden with "lots of know-how," Nilsson said.

"We want to keep that here and to protect it," he said, adding that Enterprise and Energy Minister Maud Olofsson had developed "close connections and a close dialogue" with the Swedish manufacturers and their U.S. owners, General Motors for Saab, and Ford for Volvo.

The Swedish car industry employs 140,000 people in a country of just nine million. It counts some 700 companies, including internationally renowned truckmakers Volvo Trucks and Scania, as well as airbag and safety belt manufacturer Autoliv, special steels maker SSAB and the world's leading manufacturer of ballbearings, SKF.

In recent months, as the financial crisis has widened in Europe and the U.S., the sector has seen numerous savings and restructuring programs involving thousands of job cuts. At the end of July, Autoliv announced 3,000 jobs would go.

Volvo Cars, which was sold to Ford in 1999, has announced it will slash 6,000 jobs, including 3,900 in Sweden, out of 24,400 employees worldwide. Ford said the possible sale of loss-making Volvo Cars was part of its restructuring efforts. "Given the unprecedented external challenges facing Ford and the entire industry, it is prudent for Ford to evaluate options for Volvo as we implement our ONE Ford plan," Ford president and chief executive Alan Mulally said.

A poll published at the weekend showed that seven of 10 Swedes want the state to take over Volvo Cars temporarily.

Volvo group chairman Finn Johnsson recently told Swedish financial daily Dagens Industri that his company was not interested in buying back Volvo Car and voiced opposition to calls for the government to acquire it. "The state knows nothing about the car industry and Volvo needs an owner that can increase sales and cooperate with suppliers on components and development," he said, suggesting French carmaker Renault.

Volvo Cars has been hit hard by declining sales, as interest for its big, costly models dwindles. In the third quarter, the company posted a net loss of 458 million dollars, nearly three times its full-year 2007 loss of $164 million.

Meanwhile, Saab, fully-owned by GM since 2000, has tried to avoid lay-offs at its Trollhaettan plant in southwestern Sweden, which employs some 1,200 people, by reducing its two shifts to one. "We have held intense negotiations with the Swedish government," Saab spokesman Eric Geers said, adding that the government planned to increase its subsidies for research and development.

According to Nilsson, these subsidies will amount to 450 million kronor (US$55 million) annually for 2009-2012, compared to 430 million this year.

The government also has other measures already in place -- since 2007, it has given car buyers a 10,000 kronor rebate if they buy an environmentally-friendly car, an offer that is scheduled to expire at the end of 2009.

"It is extremely important for us to get demand going. So anything that would increase demand like (incentives to) scrap old cars" would help, Geers said, noting that Sweden "has one of the largest old car markets in Europe."

Nilsson meanwhile ruled out aid similar to the bank rescue packages, saying the Swedish government would prefer to see "joint action in Europe. "Each country needs to keep in mind that it's important to follow the rules of competition," he stressed.

Spain and France last week announced plans to aid their ailing automotive industries.

Copyright Agence France-Presse, 2008

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