BERLIN, GERMANY - Germany says its offer to help Opel is a one-off and that no blanket aid for carmakers is needed, but politicians may have to reverse course, as they did for the banking sector, if an auto industry slump worsens.
The reluctance to help the sector contrasts with a U.S. proposal for a $25 billion auto rescue plan and risks leaving Germany's prestigious car industry to wilt in a flagging market, with negative repercussions for jobs in an election year.
"The damage could be major," said Ferdinand Dudenhoeffer, an auto sector expert and professor at Duisburg-Essen University. "Just like with the banks, it doesn't make sense to be dogmatic and say 'No'. The banks had to be saved somehow, and it's the same story with the auto sector," he said.
Germany at first shrugged off calls for a banks' rescue plan before changing course in early October and deciding to adopt a 500-billion euro (S$967 billion) euro sector-wide package after the financial crisis hit fever pitch in September.
Chancellor Angela Merkel said on Monday the government was ready to guarantee funds for Opel, General Motors' ailing German unit, but stressed that this was a "special case".
Opel is going through a financial rough patch that has been aggravated by troubles at its parent GM, which said earlier this month its cash holdings would fall short of the minimum needed to run its business without new funding or other drastic action.
Opel is not the only struggling auto company in Germany, however. Daimler, producer of Mercedes-Benz cars, and auto parts maker Bosch have announced production cuts and extended time off for workers in the face of waning demand.
The auto sector's fortunes are crucial to the health of the German economy, Europe's largest. Official figures show that cars and car parts accounted for a fifth of German exports last year, when Germany was the world's biggest exporter of goods.
The successes of Mercedes, Porsche, BMW and Volkswagen are also a matter of national prestige, and jobs. Close to one in five workers in Germany is employed, directly or indirectly, in the auto sector.
"FLYING BLIND"
Dudenhoeffer said the government needed to agree a package to help mid-size German auto sector subcontractors and suppliers - so called Mittelstand firms - or else such companies risked facing liquidity problems and going out of business.
Politicians are also facing up to the auto sector's troubles in the knowledge that a federal election is due next September.
The financial crisis has already dashed Merkel's hopes of campaigning on her record of robust growth. Now, some of her fellow conservatives are getting edgy about the problems facing the car industry and have begun calling for state support.
"State aid measures must be available for all automakers and their suppliers. We cannot help the large companies and leave alone the small, Mittelstand companies," said Saarland state premier Peter Mueller, a member of Merkel's Christian Democrats.
However, Social Democrat Finance Minister Peer Steinbrueck opposes a stimulus package for the auto industry, arguing that the government cannot act as a substitute for private sector demand and should not be responsible for industry's failings.
Stefan Kooths, economist at the Berlin-based DIW economic institute, said the government could not address the fundamental problem of waning demand that auto makers are facing.
"We believe that sector-based rescue shields are not right for this," Kooths said. "We are dealing with over-capacity. That means production must adjust to demand.
