EU backs car industry call for soft loans

BRUSSELS (Reuters) - EU Industry Commissioner Guenter Verheugen has backed a call by Europe's carmakers for soft loans to help develop cars which meet toughening European Union CO2 emissions targets.

The European Automobile Manufacturers Association (ACEA) wants a 40 billion euros ($51 billion) soft loans package to help it develop EU-required green technologies.

"Loan subsidies could be provided via the European Investment Bank," Verheugen said on Wednesday after meeting auto industry chief executives including those from Daimler and PSA Peugeot Citroen.

Verheugen said it was up to the bloc's member states to decide on the scale of any help to the car industry as the European Commission did not have power over the EIB.

"We are talking about a credit volume of 40 billion euros available for research and development in the area of energy efficiency, and lower fuel consumption of new vehicles," Verheugen told a news conference.

The EU is under pressure to help the car industry, a huge employer, after the United States agreed to provide soft loans to help its automakers.

Tighter environmental legislation comes as vehicle sales in Europe are falling. The European commercial vehicle market fell for the fifth straight month in September, with an 8.8 percent fall in new vehicle registrations.

The ACEA said the crisis and sliding consumer confidence has made it increasingly difficult to achieve EU targets to curb carbon dioxide emissions from cars by 18 percent by 2012.

The European car industry will suffer a further drop in sales in the fourth quarter of this year, Christian Streiff, the head of European Automobile Manufacturers Association (ACEA), told the same news conference.

"In the third quarter, there was a drop of about 10 percent ... in the fourth quarter it will be even more," said Streiff, who is also chief executive of French carmaker Peugeot Citroen.

Environmental groups said the EU should not give a blank check to the industry.

"The EU should be very clear, not a cent of public money should be loaned until the car industry drops its attempts to water down EU fuel efficiency legislation," Transport & Environment said in a statement.

EU Commission President Jose Manuel Barroso said aid to the car sector should comply with state aid rules but that the bloc could help ensuring that European carmakers remain competitive.

A Commission official said that while the EU executive had in internal discussions raised the possibility of EIB loans to the cars sector, no figures had been mentioned.

An EIB press officer declined to comment on the ACEA's 40 billion euros figure but said that it had already lent roughly 7 billion euros to the car industry over the past decade and was working on a clean transport facility.

ACEA called for "a supportive framework" consisting of four pillars -- better regulation, reciprocal trade relations, low interest loan package and market incentives -- to help renew the car fleet on Europe's roads.

It expressed concern about the risks to European makers should Europe reach a free trade agreement with South Korea in light of that nation's strong auto exports.

ACEA also noted that efforts to reach lower emissions goals would be helped if automakers could sell new models to replace cars more than 8 years old which make up more than a third of the fleet across the EU 15 countries.

EU leaders said at a summit this month the bloc must be ready to follow the United States' support to its car industry.

The Bush administration has agreed to provide $25 billion in low-cost loans to help U.S. carmakers, authorized in a 2007 energy law that requires the industry to improve the fuel efficiency of vehicles by 40 percent by 2020.

EU car-making nations led by Germany, which specializes in powerful, heavy luxury vehicles such as Mercedes and BMW, which emit the most greenhouse gases, have pressed for a softening of the terms of the EU proposal.

(Additional reporting by Gilles Castonguay, Franceso Guarascio, David Brunnstrom, Marcin Grajewski and Huw Jones; Editing by Jason Neely/Richard Hubbard)