SWEDISH AUTO INDUSTRY ENTERS CRITICAL PHASE

UNCLAS STOCKHOLM 000216 SENSITIVE SIPDIS TREASURY FOR RON BLOOM E.O. 12958: N/A TAGS: ECON EIND ETRD ELTN PGOV SW SUBJECT: SWEDISH AUTO INDUSTRY ENTERS CRITICAL PHASE REF: A. STOCKHOLM 207 ¶B. STOCKHOLM 076 ¶1. (SBU) Summary: Swedish State Secretary for Enterprise Joran Hagglund told CDA on March 27 that the ailing Swedish auto companies Saab and Volvo Cars are entering a critical phase; Saab is in formal restructuring. The Swedish government will not step in and take over the Swedish auto companies, though it has issued state guarantees for EIB loans totaling $2.4 billion. GM and Ford, which own Saab and Volvo respectively, should continue to support their Swedish subsidiaries until they can be sold, Hagglund stressed. End Summary. ¶2. (SBU) The Swedish government will not step in and take over the Swedish auto companies, although it issued a rescue package in late December 2008 valued at $3.4 billion to boost the auto industry. The program is divided into credit guarantees ($2.4 billion in guarantees for loans from the European Investment Bank),emergency loans ($606 million) and research funds ($363.5 million). ¶3. (SBU) Swedish State Secretary for Enterprise Joran Hagglund told CDA on March 27 that the ailing Swedish auto industry is entering a critical phase. Hagglund stressed that GM and Ford should continue to support Saab and Volvo until they can be sold. Sweden is pleased with the direct communications it has had with GM headquarters in Detroit, per Hagglund, which he called "open and clear despite having different positions." He was less happy with the fact that GM has tasked the Saab management team with trying to sell Saab instead of allowing them to focus on running Saab. "Ford is going about this correctly," Hagglund opined. Ford management is working to sell Volvo and allowing the Volvo management team to run the company, he continued. ¶4. (SBU) Comment: The Swedish government's tough stance on this issue has been popular in Sweden. Deputy Prime Minister Maud Olofsson has stated that "the Swedish government is not in the business of manufacturing automobiles." Olofsson will be in Washington this weekend and has a meeting with Treasury's senior advisor Ron Bloom at 11.00 on March 31. SILVERMAN