Auto sector sinks deeper into crisis

Auto sector sinks deeper into crisis


Cash-strapped: Honda Motor Co president Takeo Fukui. Cash-strapped Honda quit Formula One. Picture: Reuters
TOKYO

Saturday, December 6, 2008

DEEPENING turmoil in the global auto industry depressed investor sentiment yesterday as the fate of the Big Three US automakers hung in the balance and cash-strapped Honda quit Formula One.

The fate of the Big Three US automakers remained uncertain after contrite chief executives asked sceptical senators to deliver a multi-billion-dollar bailout for the ailing industry.

Following a near-six-hour grilling of the car giant bosses, senior Democratic Senator Chris Dodd said he would work to broker a compromise but it was unclear whether a majority of lawmakers were ready to back a rescue.

The Big Three bosses must repeat their ordeal for the House Financial Service committee yesterday.

South Korea said it was considering tax cuts for automakers who are struggling with declining domestic and overseas demand.

Anglo-Australian mining giant Rio Tinto said it was likely to shut its iron ore mines in Western Australia for nearly two weeks over Christmas to cut production in the face of reduced demand.

Investors were concerned that a record 75 basis point rate cut by the European Central Bank and a 100 basis point reduction by the Bank of England would not bring much relief to markets in the near term.

"The previous coordinated rate cuts didn't work. No one expects the European economy to hit a bottom thanks to the cuts this time around," said Kazuhiro Takahashi, equity trading information chief at Daiwa Securities SMBC.

The heads of the struggling Big Three American automakers warned that their collapse could cost up to three million jobs in the auto sector and wider economy, and pleaded for US$34 billion in financial lifelines.AFP

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