As Europe’s car makers stumble and fall, some on the edge of extinction, the European Investment Bank (EIB) has moved to save them, approving three billion Euro in loans to right some and see if it can save others. This is the second installment in a series of loans that are expected to total more than seven billion Euros by June, EIB officials said in a statement. The money approved will benefit a number of carmakers, including BMW, Daimler, Fiat, Peugeot-Citroen, Renault, Volvo Cars, Scania, and Volvo Trucks.

It is to be used to fund the companies’ research and development into developing cleaner and more fuel-efficient vehicles, the EU’s long-term lending bank said. “We are aiming to respond to Europe’s needs as rapidly and efficiently as possible, while continuing to ensure that the projects we fund are economically and environmentally sound and in line with European Union priorities,” said EIB President Philippe Maystadt. The approval of the loans comes as EU car manufacturers are being devastated by the economic crisis, with car sales plummeting and dire warnings of bankruptcy and mass job losses in an industry which provides some 12 million jobs across Europe.

According to industry umbrella group ACEA, vehicle production slumped 28 percent in the last quarter of 2008, and is expected to fall a further 15 percent this year. The loans are far more than the four billion Euro originally called for by the European Commission, in November 2008, but far less than the 40 billion the industry had demanded, and it is more than 10 percent of the bank’s total loans, meaning that “in terms of policy and sound banking practice, it would be a mistake” to lend any more to the automotive industry, Maystadt said. The European Commission last year called for an aid package of five billion Euros, including 4 billion from the EIB, to help the European car industry develop less environmentally-damaging vehicles as part of the bloc’s response to climate change and the economic crisis.

“As the long-term financing arm of the EU, we cannot bail out companies in difficulties: this is not our mission. We cannot provide short-term liquidity, because we’re not a central bank, and we cannot provide restructuring in sectors which need it,” Maystadt said. The EIB was founded in 1958 to provide long-term financing for projects aimed at bringing EU states closer together. Its shareholders are the EU’s 27 member states, and it funds its activities by issuing debt on international markets.

Guenter Verheugen, the EU’s industry commissioner, and EU ministers are trying to work out a deal with officials from General Motors Europe in a bid to prevent the company from going bankrupt after its Swedish subsidiary, Saab, said Thursday it planned to shed 750 employees from its workforce of about 4,000 in Sweden, and GM’s German subsidiary, Opel, said it was planning to close one of its four factories in Germany and make 5,110 production workers redundant as part of efforts to save the company.

BMW SALES TANK

Meanwhile, shares in BMW, the world’s leading luxury carmaker dropped by more than 11 percent after the group reported a step fall in 2008 earnings. The Munich-based company said net profit plummeted by 89 per cent to 330 million Euro as sales slumped around the world in the wake of the deepening global recession. “The BMW Group has been able to make improvements at an operating level in the midst of extremely difficult economic times,” BMW chief Norbert Reithofer said in releasing the results. “Cost structures have been further optimised and thanks to rigorous management of free cash flow, the BMW group is in a very solid financial position,” he added. Revenue dropped by five percent to about 53.2 billion Euro with the results underscoring the crisis that has taken hold in the global car business.

The carmaker posted a fourth-quarter loss before interest and tax of 718 million Euro. The company’s moves for big cuts in its workforce resulted in BMW being hit with a 450 million Euro charge in its accounts. Also hitting earnings were weak second-hand car prices. BMW is proposing to slash its dividend payment from 1.06 Euro per ordinary share in 2007 to 30 cents off last year’s results.

VW SEES BAD MOON RISING

Europe’s biggest carmaker, Volkswagen, warned of a tough year ahead after the group said worldwide sales fell 15 percent during the first two months of 2009 in the wake of the deepening global auto crisis. “An extremely difficult year lies ahead of us,” said VW chief Martin Winterkorn releasing the German-based carmaker’s latest results. But a new special bonus payment for Germans trading in old cars for new more environmentally-based models helped VW to post sales in Germany that were better than many of its rivals in other parts of the world and in its other key markets.

VW reported its best month in Germany since the economic boom unleashed by the fall of the Berlin Wall almost two decade ago with car deliveries in Europe’s biggest car market surging by 20 percent last month, although VW said overall sales were dragged down by a steep drop in business in the group’s markets in the United States, Japan and Europe as a whole with the global recession gaining momentum as 2009 commenced. While Winterkorn said VW was maintaining its 2009 earnings target, he warned that the group’s earnings would fall short of recent years with total car deliveries likely to drop by 10 percent. This followed a record year for the world’s third biggest automaker with 2008 operating profit rising by three percent to 6.3 billion Euro. After-tax profit last year jumped 13.7 per cent to 4.7 billion Euro, while sales revenue grew by 4.5 percent to 113.8 billion Euro, VW said.

Boosting VW’s business was a strong performance by the world’s leading emerging markets with deliveries to South America, the Asian-Pacific region and China rising by 12.5 percent to more than a million for the first time. VW hopes a round of new models and vehicle updates will help it to raise the number of cars it sells from 3.67 million last year to 6.6 million in 2018. Alone last year the VW group launched 52 new models, successors and product enhancements. “Our aim remains to be the top of the automotive industry,” said Winterkorn, with Japan’s Toyota currently occupying the number one sport followed by the ailing GM.