Tony O'Kane | Nov 26, 2008

It seems that it's not just the US automotive giants that are doing it tough: European automakers are reportedly going cap in hand to the European Union, begging for handouts.

However, where the US auto industry is battling for its very survival, the situation of the Europeans is far less dire (Jaguar and Land Rover notwithstanding). The European Automobile Manufacturers' Association (ACEA) has gone to the European Union requesting a €40 billion loan for the development of more eco-friendly cars, with the ACEA proposing that the loan be taken from a €130 billion EU-backed economic stimulus package.

The automakers say that extra funds will be needed to develop a new greener fleet of cars, as most current models won't be capable of achieving proposed EU emissions standards. Some parties within the EU back the automakers' proposal, however Competition Commissioner Neelie Kroes believes such a move may be anti-competitive.

While some may argue government bodies shouldn't be required to shore up non-bankrupt car manufacturers with cash injections, the increasing pressure to deliver vastly improved products in a declining market will likely put a huge financial strain on automakers. Given the huge role that the car industry plays in modern economies, and the spin-offs from research and development, it would be wise for the European Union to think carefully about this one...

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