Volvo Cars urges Swedish government to introduce incentives

Business Materials 28 January 2009 15:14 (UTC +04:00)

Volvo Cars, the Swedish subsidiary of US carmaker Ford, has urged the Swedish government to introduce more incentives to help the flagging industry, reports said Wednesday.

Suggestions included reintroducing a premium for the demolition of old cars, extending a tax-break scheme for ecologically friendly cars and conducting a review of diesel fuel taxes, reported dpa.

"A demolition premium has a double benefit. Old cars that cause more harm to the environment than new cars disappear while the car industry gets a boost and more people keep their jobs," Volvo Cars chief executive Stephen Odell told financial daily Dagens Industri.

The government last year said it planned to end the 10,000-kronor (1,500-dollar) rebate for ecologically friendly cars in June 2009. The scheme was launched in April 2007.

The call for state help coincided with the 10-year anniversary of the sale of Volvo Cars to Ford. The US giant recently signalled it wants to sell Volvo Cars.

Car sales in Sweden dropped some 45 per cent in December, "the largest [drop] in Europe," Odell said.

Volvo Cars is reviewing its costs and may shed more employees if sales don't pick up, Odell said.

Odell added that Volvo and its Swedish rival Saab - owned by General Motors - have a sizeable portion of the Swedish car market, so the sales drop has an outsize impact on the groups.

Volvo Cars was preparing its requests for state guarantees in order to secure loans from the European Investment Bank, the report said.

In December, the Swedish government launched a 28-billion-kronor (3.4-billion-dollar) package aimed at securing the long-term viability of Swedish-based vehicle makers.

It included funds for a research and development centre as well as credit guarantees and rescue loans. However, the government is anxious to ensure that state funds do not end up abroad.

State Secretary Joran Hagglund at the Ministry of Enterprise told Swedish radio news on Tuesday that the government wanted General Motors to present more detailed business plans before the Swedish government is prepared to offer credit guarantees for Saab.

General Motors took full control of Saab - one of Europe's smallest carmakers - in 2000.