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Sweden's Auto Bailout: $3.4 Billion

LOUISE NORDSTROM and MALIN RISING | December 11, 2008 01:22 PM EST | AP

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STOCKHOLM, Sweden — The Swedish government on Thursday unveiled a 28 billion kronor ($3.4 billion) support package for the nation's ailing auto industry, but insisted it won't buy Volvo or Saab from their U.S. owners.

The plan offers credit guarantees, emergency loans and research funds to boost companies in the "Swedish automotive cluster," the center-right government said.

It was announced just hours after the U.S. House of Representatives approved a bill to get $14 billion in emergency loans to the struggling U.S. auto industry.

Democrats and the White House hoped the bill could be enacted by week's end, but it is jeopardized by opposition from Republicans in the Senate.

Car makers Volvo and Saab have appealed to the Swedish government for support because of the financial woes of their U.S. owners, Ford Motor Co. and General Motors Corp., which are focusing on saving their American brands.

Powerful labor unions have also pressured the government to save Sweden's auto industry, which since June has shed about 10,000 jobs, or 7 percent of its work force.

The government said its support package was needed to safeguard "the continued success of the Swedish automotive industry," even if the industry's crisis deepens. It also called for quicker development of green technology.

The plan, which needs approval by lawmakers, includes a maximum of 20 billion kronor in credit guarantees to automotive companies, and up to 5 billion kronor in rescue loans to bail out companies in crisis. The government said it would also earmark 3 billion kronor for research and development in the automotive sector.

Asked at a news conference whether the government could guarantee the survival of Volvo and Saab, Finance Minister Anders Borg said that was not its responsibility.

"The owners are responsible for the survival," Borg said. "We lay the foundations so that the Swedish automotive cluster has very good conditions to develop."

Ford has said it intends to offload Volvo, by either selling the Swedish automaker or spinning it off into a separate company, while GM said it "expedited and strategic review" of Saab.

The Swedish government reiterated it was not interested buying the two brands, and that the measures were based on discussions with the "U.S. automotive industry and conclusions drawn by current or any new owners."

The plan was welcomed by corporate and union leaders.

"We've talked all autumn about how important the vehicle industry is for Sweden, and so we have to see this as a victory," said Michael Blohm, a union representative at Volvo Cars in Goteborg.

Volvo Cars spokeswoman Maria Bohlin said the move showed Swedish politicians were willing to fight to save Swedish jobs.

The government said the plan was in line with the proposals in the European Commission's economic recovery plan under which companies can raise loans in the European Investment Bank. The EIB has promised to lend Europe's automotive industry a total of euro16 billion ($21 billion) for the development of greener solutions and production.

Filed by Dave Burdick  |  Report Corrections