ITALY APPROVES AUTOMOBILE SECTOR ASSISTANCE PACKAGE

UNCLAS SECTION 01 OF 02 ROME 000188

SIPDIS

DEPT FOR EEB/TPP/MTAA (NAFZIGER)
DEPT PLEASE PASS TO USTR (RMALMROSE)

E.O. 12958: N/A
TAGS: ETRD ECON EFIN PREL WTO IT
SUBJECT: ITALY APPROVES AUTOMOBILE SECTOR ASSISTANCE PACKAGE

REF: A) SECSTATE 4753 B) 08 SECTATE 125609 C) 08 MOSCOW 3745

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1. (U) Summary: On February 6, 2009, the GOI approved an automobile
sector assistance package as part of a broader industrial sector
stimulus package. The auto sector measures provide consumer
incentives, ranging from 500 to 6500 euros, to increase demand and
do not appear to give direct support to any one company. The
stimulus package goes into effect immediately, but must still be
approved by parliament within 60 days. Its passage is expected. End
summary.


2. (U) Hit by a fall in total auto sales of 13.4 percent in 2008,
11.4 percent from flagship producer Fiat alone, the GOI put together
an automobile sector assistance package designed to stimulate demand
and counter an estimated further fall in sales for 2009. According
to the Ministry for Economic Development, the Italian auto sector
activity represents about 11.4 percent of GDP (165 billion euros),
makes up 30 percent of the total industrial output, and employs
400,000 workers directly and 1 million indirectly. While welcoming
the stimulus package, Italian trade unions, car workers and the
national industry association also expressed disappointment at its
modest size compared to what other UE countries have offered their
auto sectors.


3. (U) The automobile support package includes incentives from 500
up to 6,500 euros for consumers and businesses that trade-in old
cars, commercial vehicles or scooters for new models meeting certain
parameters of CO2 emissions. For example, there is a 1500 euros
incentive for consumers trading vehicles purchased before December
1999 for new gasoline models emitting less than 140 grams/km of CO2,
or less than 130 grams/km for diesel. According to the GOI, this
specific measure is compliant with the EU CO2 automobile emissions
Directive. For the acquisition of new vehicles alone, the incentive
payments range from 3,500 for methane gas, electric or hydrogen
fuel models to 6,500 for vehicles with minimum CO2 emission.


4. (U) The vehicle buyer will receive the incentives through
discounts directly from the car dealerships, which will in turn
receive a tax rebate from the GOI for the same amount. Preliminary
information suggests that the incentives apply to the purchase of
domestic-and foreign-manufactured vehicles. Post can provide
further details on the breakdown of the incentives based on CO2
emissions if necessary.


5. (U) The package also includes a 55 million fund to support
reduction of CO2 emissions by local public transportation systems.
It will be available for local governments and municipalities that
purchase low CO2 emitting technology for their public
transportation. However, much of the funds (44 million euros) will
come from expected increases in value-added taxes.


6. (U) Comment: According to the GOI, these measures are meant to
counter a further contraction of the automobile sector. The GOI
estimates that 60,000 jobs will be at risk in this sector and that
its further contraction may contribute to a drop of 0.5 percent in

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GDP this year. One Italian bank estimated that the auto sector
assistance package could boost vehicle sales by 200,000 units in
2009 and reduce the expected annual drop in sales from the 20
percent that has been forecast to 10 percent. The stimulus plan
appears to be broadly in line with similar packages unveiled by
France, Germany and the UK. End comment.
DIBBLE