GM looks for more bail-outs to stay afloat

"European governments find themselves in the same catch-22 as Washington," said Lex in the FT. With GM looking for a handout to keep its European operations running, they can either refuse and "suffer the brutal consequences" as 50,000 join the dole queues, or pay out and waste a mountain of taxpayers' cash.

GM has already had $13.4bn in aid from the US government. And now it has asked for a £2.3bn bailout, claiming its European arm made up of Germany's Opel, UK's Vauxhall and Sweden's Saab will be bankrupt within a matter of weeks. It's clear we're in an automotive depression, S&P analyst Efraim Levy told Bloomberg. American new vehicle sales plumbed fresh lows in February; GM's sales were 53% down year-on-year. Even cash-rich Toyota has had to turn to the Japanese government, said Alan Ohnsman on Bloomberg.

The question is what kind of industry will be left behind after all these bail-outs. "If we go further, then there is a danger that we will have only one or two independent manufacturers left," BMW's chief executive Norbert Reithofer told the FT. Closing plants would be a better solution. In fact, with structural overcapacity of perhaps 20%, "the best thing for Europe's broader car industry would be for GM Europe to disappear", said Lex. But the German government, for one, won't allow Opel to fail in an election year. The best taxpayers can hope for is that European states demand substantial capacity reductions in return for aid. Otherwise the sector's competitiveness will be hampered "for years to come".

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