UK Car Makers In Talks With Government To Seek Bailout

December 6, 2008 2:17 p.m. EST

London, UK (AHN) - The authorities in the U.K. indicated on Saturday that they are in talks with the car makers to deal with the current slump in the demand and depleting cash reserves, after the on-going negotiations by its U.S. counterparts with the Detroit's Big Three.

The car sales in the U.K. plunged to the lowest level in almost 28 years in the month of November amid on-going recession and weakening credit market condition, a report showed on Thursday.

The London-based Society of Motor Manufacturers & Traders said in a statement that the country saw a decline in registrations by as much as 37 percent last month to 100,333 from 158,735 a year earlier in the same period.

The reports said that Business Minister Ian Pearson and Business Secretary Peter Mandelson are in talks with the representatives from the auto sector to discuss ways to boost vehicle sales in the country.

The market analysts are expecting that the government may propose a plan to make it easier for the borrowers to get auto loans and to increase access to more funds to help shore up their finances.

Honda Motor Co., which is Japan's second biggest automaker, recently decided to suspend manufacturing in England for two months in February and March to reduce production.

The car manufacturer also decided to quit Formula One, citing its need to concentrate on its core automobile business.

Volvo's sales reflected to be the best among the worst performances presented by the automakers in the country, by dropping 6.7 percent. Sales of Chrysler moved down by 76 percent, Mitsubishi reported a decline of 70 percent, Land Rover and Renault both tumbed by as much as 64 percent.

The U.K.'s gross domestic product (GDP) contracted by 0.5 percent in the third quarter, which is the first fall in 16 years, sending the country into recession.

The market analysts are expecting the Europe's second-largest economy to drop as much as 1.1 percent next year, which would be the lowest since 1991.