The European Commission announced on February 25 2009 that it had approved a number of steps to help the bloc's motor vehicle industry against the impact of the global financial crisis.

The motor vehicle industry in the EU is the provider, currently, of about 12 million jobs. But new registrations are down by 20 per cent and expectations for 2009 are gloomy.

"Due to its close links to other sectors and the wide spread of supply industry and vehicle trade, the negative economic effects reaches out to millions of employees in all member states," the EC said.

The EC said that it was supporting "a proactive stance to support industry in their efforts to withstand the crisis, soften negative effects and ensure long-term competitiveness".

Building on the European Economic Recovery Plan of 2008, the plan sets out various measures to improve access to credit, clarify the rules for granting state aid in the particular circumstances, boost the demand for new vehicles through coordinated national action, minimise social costs and retain skilled workforce and to defend fair competition in open markets.

"The Commission suggests a new partnership with industry, trade unions and Member States in the context of the CARS 21 process to accompany the common crisis response," the statement said.

European Commission Vice President Gunter Verheugen, responsible for enterprise and industry policy, said: "We are talking about millions of jobs, not only in the automotive sector, but in the supply chain and in the aftermarket.

"We are committed to defend these jobs, because the European automotive industry is the most competitive and innovative industry in the world. We have already identified the needed support and now we have to concentrate on rapid delivery in a coherent way. In addition, we should avoid burdening the industry with new legislation. We need to closely co-ordinate our efforts with member states and ensure that the broad range of available support tools is applied effectively," Verheugen said.

"The new CARS 21 round table will help to do so," he said.

Competition Commissioner Neelie Kroes said, "Governments have a responsibility to address the short term problems in this sector, while preparing the sector - and the economy as a whole - for long term recovery. We need to strengthen both the production and the sale of cars within the single market, and what we have set out today will help governments take the right measures to do just that."

Primary responsibility for dealing with the crisis lies with industry, the EC said.

However, the European Economic Recovery Plan of November 2008, has set out key
elements of the public support relevant for the automotive sector.

The EC said that in order to ensure transparency and a rapid adoption of national schemes, it had organised the exchange of best practices and proposed common principles on which car scrapping schemes should be based.

It said that the new Temporary Framework for State aid measures adopted in December 2008 and revised in February 2009 was designed to allow member states to provide aid to companies facing problems with access to liquidity and whose difficulties do not pre-date the crisis.

Aid measures also include cost-based loans for the production of green products.

Much of this public support should be covered by horizontal policy instruments applicable to industry as a whole and should be met through a combination of European and member state-level action.

The European Investment Bank is expected to approve 3.8 billion euro worth of automotive sector projects in March while additional projects in the pipeline add up to a total of 6.8 billion euro.

The financial branches of car makers may also qualify for aid under the schemes adopted by the EC for the banking sector.

"Targeted and temporary public sector support at EU and member state level can help to complement industry's efforts to withstand the crisis and cushion the blow to people whose jobs might be affected," the EC said.

Apart from Cars 21, the EC launched the "European Partnership for the anticipation of change in the automotive sector" in October 2007.

"This partnership offers a platform to anticipate and mitigate the social impact of restructuring," the EC said.

The EC said that it invited member states to make full use of the flexibilities offered:

Various EU funds and policy instruments can be mobilised to support the social cost of adjustment and ensure that necessary skill levels required for the future competitiveness of industry are retained in the industry.
An increase of advance payments for the European Social Fund (ESF), and simplification of the criteria, can be used to combat unemployment, such as supporting short-time workers by financing training and a part of wage and non-wage labour costs.

Possibilities to benefit from interventions financed by the European Globalisation Adjustment Fund (EGF) should also be explored, the EC said.

Up to now, the EGF has already intervened in four automotive sector cases with a fifth in the pipeline.

"The situation is aggravated by the rising risk of protectionism or a revival of nationalism. Protectionism is making it harder for European producers to access third country markets."

The first cases of this can to be seen in third countries, for example in form of new import licensing requirements or rising import duties, the EC said.

"The EU is therefore committed to avoiding any new trade restrictions being created towards third countries and expects the same attitude from its trading partners."

In a media statement, the Czech Republic, currently the holder of the rotating presidency of the EU, said that it welcomed the EC decision.

The Czech presidency said that it appreciated "the rapidity of the Commission response to its call for immediate reaction to the crisis".

Prague said that it had asked the EC to identify instruments that will back this key European industry while preventing distortions on the EU internal market and respecting the EU rules for state aid.

Czech deputy prime minister for European Affairs Alexandr Vondra said that "short-term measures to help car manufacturers must not jeopardise the long-term prospects of the industry as a whole.

"Even at a time of crisis we can only undertake steps that are co-ordinated and well thought out and at the same time are not in contradiction with the rules of the game."

The Czech presidency welcomes the fact that the EC announcement had been ahead of the informal meeting of EU heads of state and government to take place on March 1 in Brussels and of the Spring European Council, scheduled for March 19 and 20.

The debate on the impacts of the crisis on the car industry will feature as one of the main topics at the upcoming meeting of the Ministers for Competitiveness, to be held on March 5 in Brussels.