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European auto firms set to benefit from US bailout

(Agencies)
Updated: 2008-12-11 07:59

Bayerische Motoren Werke AG and Daimler AG, the largest luxury-car makers, stand to benefit more from a government rescue of the US automobile industry than if their competitors go bankrupt.

A proposal to grant General Motors Corp and Chrysler LLC $15 billion in emergency funding should avert a meltdown that would depress sales and drag down the financially strapped parts makers that supply the European companies' plants both in North America and elsewhere.

"You can't underestimate what would happen when a large player collapses," BMW Chief Executive Officer Norbert Reithofer said in an e-mailed response to questions. "That would impact the supplier structure and therefore the entire industry."

The US is the No 1 market for the Munich-based company and the second-biggest for Daimler's Mercedes-Benz. Both carmakers have factories there, and while they and other German brands control about 7 percent of the American market, they compete more with each other than with GM and Ford Motor Co.

Any sales boost resulting from the collapse of a US carmaker would come "in the very long term", said Nigel Griffiths, London-based director of research firm IHS Global Insight. "In the short term, volumes would come heavily down because of the impact of a collapse on the real economy and the American psyche."

BMW rose as much as 98 cents, or 4.4 percent, to 23.09 euros and was trading at 22.23 euros as of 12:12 pm in Frankfurt. The stock has declined 47 percent this year. Daimler was little changed at 25.47 euros and has slid 62 percent this year.

Stuttgart, Germany-based Porsche SE, maker of the iconic 911 sports car, also counts the US as its largest market, while Volkswagen AG, the biggest European carmaker, is building its second North American plant in Chattanooga, Tennessee.

Daimler of Stuttgart and Wolfsburg-based VW declined to comment on the US bailout. Porsche didn't return calls.

Parts purchased by manufacturers account for 75 percent of the value of an average car, according to Germany's VDA industry group. That makes Continental AG, Robert Bosch GmbH and Magna International Inc, which all make parts for both US and European customers, critical for maintaining production.

Many components are unique to specific models, making it tough for carmakers to mix and match between suppliers. Anti- lock brakes for GM's Chevrolet Suburban, for instance, wouldn't be suitable for Volkswagen's Golf.

"It could get enormously messy," said IHS' Griffiths. "Most carmakers have people looking at the security of their supply chain. Those are the people working overtime right now."

The threat to US revenue comes as car sales in Germany are forecast to drop 6.5 percent next year to the lowest since reunification in 1990, according to the VDA. The auto industry in Europe's largest economy accounts for one in eight jobs.

"Germany wouldn't be spared the fallout should one of the top three US automakers collapse," said Klaus Lippold, chairman of the German parliament's transportation committee and a member of Chancellor Angela Merkel's CDU party.