As Europe’s car industry struggles with sinking sales as consumers avoid big-ticket purchases in the face of a worldwide recession, European Union industry ministers are trying to find ways to support them, amid calls for up to 10 billion Euro (USD 13.2 billion) in credit from the European Investment Bank (EIB.) Ministers attending talks in Brussels said they planned to approve in March some 3.2 billion Euro in soft loans to help carmakers develop greener and more fuel-efficient cars. But they also expressed an openness to do more.

“Naturally there is always the question of whether we could do more. But first we have to implement what we have,” said EIB Vice-President Matthias Kollatz-Ahnen. “It is clear that ... there will be additional projects, but they are not now mature,” he said. EU leaders agreed in December to provide four billion Euro in EIB loans in December. But sources close to the talks in Brussels said some ministers had called for this amount to be raised to 10 billion Euro. Carmakers, which represent Europe’s most important industry, have been hard hit by the economic crisis, with sales falling by eight percent in 2008 over the previous year. Experts predict a further fall in sales of between 10 and 20 percent in 2009, with sales of heavy-duty vehicles likely to fall 30 percent. Adding to the difficulties, access to private credit has also been stifled by the credit crunch, meaning the EIB is often the only lender available.

European Industry Commissioner Guenther Verheugen noted that while the “primary responsibility to respond to these challenges rests with industry itself,” public support for the sector was also necessary. This was particularly needed in view of the EU’s strict targets on car emissions, which are set to come into force over the next decade. So far, Germany, Spain, Sweden and Portugal have already finalised national rescue plans, with France and Italy set to follow suit. But Verheugen warned governments against engaging in a “subsidies race” and to avoid distorting the internal market by supporting only national champions. The commissioner said industry ministers had agreed to coordinate their policies, which range from financial incentives to scrap old cars to the purchasing of vehicles by the public sector.

“There is agreement that such support needs to be effective and coordinated. It should respect key principles such as open global markets, fair competition, better regulation as well as cooperation and transparency,” Verheugen said. The commissioner also highlighted the need to engage in “early dialogue” with the new US administration of Barack Obama as it puts in place its own plans to support US carmakers. German Chancellor Angela Merkel said while she wants EU and government subsidies for German auto manufacturers, she doesn’t want Obama to give subsidies to American car makers, and warned him there would be consequences if he did so. The signs of trouble for EU car makers are everywhere. Volvo, the Swedish subsidiary of US carmaker Ford, is to assemble fewer cars in the coming two months, reports said.

The decision was to avert a build-up of unsold vehicles, and production was estimated at 5,000 cars per month for January and February, the Goteborgs-Posten newspaper reported. “It is still tough and we do not see any major turnaround of orders,” Volvo Cars spokeswoman Maria Bohlin told the paper but she did not confirm the paper’s production figure. There were no immediate plans to lay off more staff. Some 2,000 employees left the company at the end of 2008. Ailing British luxury carmaker Jaguar Land Rover is to axe 450 jobs, including those of 300 managers, as part of a cost- cutting scheme following a “severe reduction” in demand for new cars, the company said. The firm, which was bought by India’s Tata group for GBP 1.7 billion (1.88 billion Euro) last year, employs a staff of 15,000 at plants in Britain.

“We don’t expect sales conditions to return to normal levels for some time,” Chief Executive David Smith said. “It is critical that Jaguar Land Rover becomes a more efficient and dynamic organisation to face up to the challenges that we will meet in the years ahead,” he added. Jaguar Land Rover had been among top carmakers urging the British government to provide financial aid to the car industry.

Prime Minister Gordon Brown‘s spokesman said the government was “disappointed” at the announcement. It came after carmaker Nissan said it would cut 1,200 jobs at its giant plant in Solihull, north-east Britain. Meanwhile, Italian carmaker Fiat will begin in March the production of its Punto automobile in Serbian factory Zastava, Belgrade media reported. The director of the Zastava factory, Zoran Radojevic, said the agreement between Fiat and Zastava will be signed this week. Radojevic didn’t specify the amount of the production but said the factory, situated in central Serbian town of Kragujevac, can produce 20,000 cars per year and with “minimal investment” the capacity can be upgraded to 40,000 per year. Serbia and Fiat signed a car-making deal last September which is expected to revive the Serbian car industry and bring almost one billion Euro in investment in the Zastava factory, 110 kilometres south of the capital Belgrade, once the heart of the former Yugoslavia’s car industry and its best-known product was the infamous Yugo.