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DE RUEHVI #0091 0221608
ZNR UUUUU ZZH
R 221608Z JAN 09
FM AMEMBASSY VIENNA
TO RUEHC/SECSTATE WASHDC 1894
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UNCLAS VIENNA 000091 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EIND ELAB ECON ELTN AU
SUBJECT: Austria Moves to Bolster Automotive Industry 
 
¶1. The automotive crisis has reached Austria.  With no 
national champion but an extensive supplier network and 
assembly facilities, the health of Austrian industry is 
linked to the fortunes of European and American car producers 
including BMW, Opel (GM), Chrysler, and Mercedes.  The sector 
accounts for a tenth of Austria's industrial production and 
employs 65,000;  including dealers and related businesses, 
the automotive sector supports 360,000 jobs (12 percent of 
Austria's private-sector workforce). 
 
¶2. New car sales in 2008 in Austria were down just 1.3%, but 
as elsewhere in Europe the sector took a dive in late 2008 
(down 13 percent in November and 16 percent in December). 
The Economic Chamber's head for automotive supply, Dietmar 
Schaefer, told us sales will fall by at least a quarter in 
2009, and will likely continue to fall in 2010. 
 
¶3. One of the largest automotive suppliers in Austria is 
General Motors subsidiary "GM Powertrain Europe," which 
produces engines and transmissions, primarily for Opel models 
built in Europe.  This facility will also reportedly produce 
the first motors for the Chevy Volt.  GM-Powertrain announced 
in early January that it would put 1,540 of its 1,850 workers 
on reduced hour schedules, which amounts to a government- 
subsidized temporary layoff in which workers receive partial 
wages and partial unemployment compensation.  Another major 
player in the Austrian automotive sector is Canadian-owned 
Magna Steyr, which assembles vehicles for Chrysler, BMW, and 
other makers.  They have also temporarily laid off much of 
their workforce.  Eybl International, an Austrian maker of 
automotive interiors, has filed for administrative 
receivership and may be closed if restructuring measures fail 
in the coming weeks.  Overall, at least 7,500 workers in the 
sector are on layoff status and those hired on temporary 
contracts are out of work completely. 
 
¶4.  Against this background, Chancellor Werner Faymann and 
Vice-Chancellor Josef Proell held an "Automotive Summit" with 
business and unions in early January to discuss ways to ease 
the crisis.  Coalition leaders Faymann and Proell made clear 
the GOA does not plan to take equity stakes in Austria's 
automotive industry.  The summit did agree on measures (to be 
implemented by the end of January) to help secure jobs: 
-- Extending the government-subsidized reduced hour schedule 
from a maximum of six months to a maximum of 12 months (18 
months under special circumstances).  Workers will receive 
fifty percent of their wages for 20 hours per week from the 
state unemployment fund; 
-- Special re-training programs for those working reduced 
hours as well as those who have lost their jobs in the 
automotive sector; 
-- Government guarantees and subsidies for investment in the 
automotive industry will increase from EUR 2.9 to 5.2 
billion; 
-- An additional EUR 33 million will go to fund research on 
environmental technologies in the automotive sector. 
 
Austria to Introduce Rebate for Junking Old Vehicles 
--------------------------------------------- ------- 
 
¶5. Automotive suppliers and particularly dealers are not 
happy with the outcome of the summit, arguing that it does 
not go far enough in addressing the crisis.  While they do 
accept that state capital injections are not realistic in 
Austria -- largely because few companies are headquartered 
here -- they had sought more incentives for customers to buy 
new vehicles, such as a rebate for scrapping old cars or a 
tax holiday for the license tax when registering a new 
vehicle.  After consultations with eight other EU countries, 
the GoA announced on Jan. 20 that it will introduce a 
incentive for scrapping cars that are more than 10 years old, 
namely a rebate tied to the purchase of an efficient/low- 
emissions new car (similar to the incentive package recently 
approved in Germany).  Negotiations are ongoing;  it appears 
the premium, targeted at about 30,000 vehicles, will be 
somewhere between EUR 1000-2500 but the auto industry and 
importers will likely have to cover around half of the 
premium. 
 
¶6. Automotive group spokesman Schaefer expressed 
disappointment with the GOA's limited support for the 
industry and said that the coming years will be tough.  He 
expects Austria's automotive sector will survive the crisis 
and noted that investments in this field pay off faster than 
in other sectors. 
 
GIRARD-DICARLO