VZCZCXRO3039
PP RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV RUEHSR
DE RUEHMD #0125 0351728
ZNR UUUUU ZZH
P 041728Z FEB 09
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC PRIORITY 0171
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0726
RUEHBR/AMEMBASSY BRASILIA 0639
RUEHBY/AMEMBASSY CANBERRA 0887
RUEHME/AMEMBASSY MEXICO 0696
RUEHNE/AMEMBASSY NEW DELHI 0162
RUEHUL/AMEMBASSY SEOUL 0737
RUEHKO/AMEMBASSY TOKYO 0753
RUEHLA/AMCONSUL BARCELONA 3793

UNCLAS MADRID 000125 
 
SIPDIS 
 
EEB/TPP/MTAA BNAFZIGER, USTR ROY MALMROSE 
 
E.O. 12958: N/A 
TAGS: ECON EFIN WTO SP PREL ETRD
SUBJECT: GOS MOVES TO SUPPORT AUTO INDUSTRY WITH MODEST 
MEASURES 
 
REF: A. SECSTATE 04753 
     ¶B. 08 MADRID 1189 
 
¶1. (U) Summary. Spain is the eighth largest producer of 
automobiles in the world, making any downturn in the 
automotive industry significant for the Spanish economy. 
With domestic production down 45 percent in December from the 
year before, it is no surprise that more than half of Spain's 
70,000 auto workers have been affected by "temporary" 
layoffs.  The GOS has warned the 11 multinational auto 
companies against outright layoffs and has introduced two 
relatively modest measures to stimulate lending for 
innovative production and green-car purchases (800 million 
euros and 1.2 billion euros, respectively).  Spanish auto 
industry associations are pushing for more aggressive action, 
and the GOS continues to consider additional car industry 
aid. End Summary 
 
¶2. (U) As Spain is the eighth largest producer of automobiles 
in the world, any downturn in the automotive industry is 
significant for the country and its economy.  This sector 
directly employs 70,000 Spanish workers - with hundreds of 
thousands more indirectly employed - and contributes 2-5 
percent to GDP.  With domestic sales down by 42 percent in 
January and domestic production down 45 percent in December 
from the year before, practically all the 11 multinational 
auto companies operating in Spain have reduced employee work 
hours via "temporary layoff plans."  Between 30,000-50,000 
auto industry workers have reportedly been affected by these 
work hour reductions, ranging from days to weeks.  Some auto 
makers have also employed small-scale permanent layoffs 
despite GOS warnings that such layoffs will preclude these 
companies from benefitting from GOS support measures. 
 
¶3. (U) However, so far GOS measures have been relatively 
modest.  The GOS announced a 800 million euros auto support 
package in November, with 110 million euros to be designated 
for training, engineering and systems projects and the 
remaining 690 million euros to be used as a zero-interest 
credit line for new production lines and technology 
(particularly energy efficient or otherwise innovative 
technology).  The GOS has also recently reintroduced and 
increased eligibility for its summer 2008 plan to provide 1.2 
billion euros in low-interest loans for those wishing to 
replace older cars with new environmentally friendly cars. 
The GOS has not taken any measures to support the auto 
companies' suppliers. 
 
¶4. (U) Regional governments have also actively worked to 
encourage car makers to keep their plants open and jobs 
available.  The president of the region of Aragon said 
November that the region intended to provide 200 million 
euros in loans for General Motors to produce its new Opel 
model at its Figueruelas plant.  The president of Catalonia 
travelled recently to Japan, among other reasons, to convince 
Nissan decision makers to keep plants in Barcelona open. 
(Note: Nissan attempted to lay off over 1,600 workers in 
November at its plant in Barcelona, a move that was met with 
angry, semi-violent demonstrations (ref B)) 
 
¶5. (U) Comment: Overall, auto industry associations in Spain 
have not been satisfied with the GOS measures to date and are 
pushing for more aggressive action.  Media reports suggest 
that the GOS continues to engage with auto makers and to 
examine providing additional car industry aid such as a 
reduction in car taxes or fees.  However, the GOS will be 
limited in the extent that it can affect demand, and hence 
production, since 80-90 percent of cars produced are exports 
to the rest of Europe.  There are 11 multinational car 
producers that operate in Spain, including General Motors and 
Ford, with a total of 18 factories across the country.  There 
are no entirely Spanish car producing companies in Spain. 
 
CHACON