SA car industry in a crunch, seeks govt support

The South African vehicle industry has approached the government for loans to help curb job losses as it struggles with a domestic and global economic downturn, industry representatives said on Friday.

“We are not looking for hand-outs,” said Nico Vermuelen, director of the National Association of Automobile Manufacturers (Naamsa). “The key issue is access to credit, loan finance and low interest. The amount we are looking for will have to be the subject of research.”

Car producers including Volkswagen, Mercedes-Benz, Ford, Toyota and General Motors employ about 116 000 in South Africa and are key for job creation in a country where about a quarter of the labour force is unemployed.

“There could be severe job losses if they do not get the money.
The problem is that they undertook huge investments and are now sitting with high costs and debt levels while sales have collapsed,” said Nicky Weimer, senior economist at Nedbank.

“The idea that government should help them is not far-fetched, government has always been a big influence in the sector with the development programme.”

Volkswagen has already said it would axe 400 jobs.

Stewart Jennings, president of the National Association of Automobile Component Manufacturers, said component producers would need at least R10-billion in support.

“We are looking for at least R10-billion over the next 18 months, with interest maybe at 2% to help with cash flow,” Jennings said.

About 22 500 jobs are on the line in the car- and component-manufacturing sector, while 7 000 to 8 000 people could lose jobs in the vehicle retail side, Vermuelen said.

Countries such as the United States, Britain, Brazil, France and China have already unveiled plans to aid their motor industries as the credit crunch and worsening economy hit consumer spending worldwide.

New car sales in South Africa had their biggest fall in 24 years in January, partly due to higher borrowing costs, while the global downturn has also hit demand for exports.

Naamsa said exports could fall by 27,5% in 2009, after a 39,7% rise in 2008.

Dealerships also want government help. About 300 closed in 2008, said Jeff Osborne, chief executive of the Retail Motor Industry Organisation.

Imperial Holdings, which owns about 200 outlets, shut about 22 dealerships in the past 12 months, said Tak Hiemstra, executive director of strategic planning.—Reuters

Client Media Releases

SA political parties talk foreign policy
Barloworld announces new group structure
Should I stay or should I grow?
Use Microsoft's eDiscovery for non-Office 365 data sources