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Scrappage scheme boosts British car industry
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08:07, May 31, 2009

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The British government on Friday hailed its car scrappage scheme as a success as the plan resulted in the sales of or orders for more than 35,000 cars since its launch in April.

The positive results have spurred morale of British car manufacturers and consumers and boosted the government's confidence in rescuing the country's ailing car industry, officials said.

British Business Secretary Peter Mandelson said the 300-million-pound (483-million-U.S.-dollar) scheme had "got off to a flying start" and was "winning all round."

He also called on consumers to place more orders. "If you don't wish to be disappointed, get your orders in soon," Mandelson told reporters on Friday.

The scheme was organized on a "first come first served" basis in an attempt to urge potential buyers to make a quick decision.

The initiative was also designed to rid some of the older and more polluting cars off Britain's roads. By way of a cash incentive it encourages motorists to part with their old vehicle in order to claim a discount of 2,000 pounds (3,224 U.S. dollars) off a new model.

Several manufacturers have adopted the scheme and some are promoting it via extensive advertising campaigns on radio and television.

One in every five cars sold had been purchased through the scrappage scheme, which was described as an encouraging sign by the Society of Motor Manufacturers and Traders (SMMT).

"With the scrappage incentive scheme fully operational, the industry is optimistic about the positive impact this will have on the market and on UK production facilities," said SMMT Chief Executive Paul Everitt.

"Despite the current difficulties, the UK must prepare for the return of global growth and government support for the industry is an essential part of the process," he added.

However, there are still some concerns. Speaking on Friday, Nikki Rooke, the SMMT's communications head, said there was an issue of obtaining bank loans to cover additional cost of the purchase, especially in the current economic climate.

The increase in sales and orders has been welcomed by manufacturers. However, it remains to be seen until July, when June's sales figures are released, and a proper assessment is made as to whether Britain's car industry is on the road to recovery.

"But it will be a couple of months before we can really assess the true impact on the market through the monthly registrations data," the SMMT said.

Meanwhile, there are fresh worries in Britain's automotive industry following U.S. car manufacturing giant General Motors' announcement that it may declare chapter 11 bankruptcy. Chapter 11 bankruptcy is a chapter of the U.S. Bankruptcy Code which permits reorganization under U.S. bankruptcy laws.

British car manufacturer Vauxhall Motors, a GM subsidiary, is particularly concerned. Around 5,000 are employed by the firm and there are worries that many may lose their jobs despite reassurances from the U.S. car giant.

Vauxhall operates factories in Ellesmere Port in northwest England and another in Luton north of London, and there is talk that at least one of the two may close.

Car manufacturing in Britain has already fallen sharply in recent months, and even the positive news about the government's scrappage scheme may prove too little and too late.

In April, British car production dropped 55.3 percent and commercial vehicle manufacturing fell by 65.2 percent, the SMMT said. The organization said the figures showed that recovery was likely to be slow and protracted.

In Germany, a deal was reached on early Saturday that Canadian auto parts maker Magna will take over Opel, another GM business in Europe, to secure tens of thousands of jobs in Germany.

German Finance Minister Peer Steinbrueck told reporters that the takeover will be backed by a Russian bank and in conjunction with Russian automaker GAZ.

Under the agreement, Opel will be put under the care of a trustee and the German government will provide a 1.5-billion-euro (2.1-billion-dollar) bridge loan to support the deal.

The final decision rests with GM itself, but the German government's preference is important due to its large amount of financial support.

Source: Xinhua

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