December 30, 2008 / 5:32 AM / 11 years ago

German car sector, union demand quick state aid

BERLIN (Reuters) - Germany’s powerful auto industry and the engineering union IG Metall jointly urged Chancellor Angela Merkel on Monday to offer speedy and decisive support for the sector, which is suffering from a collapse in global demand.

In an open letter to the Frankfurter Allgemeine Zeitung, the VDA auto association and IG Metall called for a quick agreement on car tax relief based on vehicles’ CO2 emissions.

In addition, a “strong market impulse” is needed to boost short-term demand, the letter said. It left open exactly what kind of support the sector was looking for.

The government has said help for the auto sector will play an important role in its planned second package of stimulus measures for the German economy which it is expected to unveil during January.

The carmakers and union want the new car tax rules to come into force next July.

“This is a decisive step to stabilise the market and to give consumers confidence,” the letter said, adding if no measures are agreed in coming weeks, demand could collapse further and hit jobs in the sector.

Germany’s auto industry accounts for roughly 20 percent of jobs in Europe’s biggest economy and cars and car parts made up a fifth of German exports last year.

The government has already passed measures to temporarily exempt new cars from tax but is still working on measures to tax cars according to their emissions.

Some politicians have also called for incentives to be granted to consumers who scrap their old cars.

In addition, said the letter, it is important to guarantee the refinancing of the auto industry through direct access to favourable credit or guarantees.

Among the bosses who signed the letter were Daimler chief Dieter Zetsche, Volkswagen Chief Executive Martin Winterkorn and Audi chief Rupert Stadler.

Reporting by Madeline Chambers; Editing by David Cowell

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