Two giant carmakers ask Romanian state for help

Furthermore, according to news published late last week and confirmed by sources on the local market for Business Standard, French Renault group has also asked for guarantees for a €100 mln loan. The group, which controls local Automobile Dacia car manufacturer, has started work on a design center worth €100 million in the town of Titu, close to Bucharest.

This is the first negative signal regarding the investments of the two giants in Romania, amid a 50 percent plunge of the local auto market month-on-month in November. “We confirm that we asked the Romanian government for a letter of guarantee for a €400 million loan from the European Investment Bank. If the loan is granted, Ford plans to invest the funds in the Craiova project,” Crisan told Business Standard. The group, which is facing severe financial problems in the U.S., last year acquired local Automobile Craiova car manufacturer, based in southern Romania.

To date, Ford officials have indicated that plans for Romania are unchanged, in spite of the international economic situation. Ford is to develop a production unit in Craiova in 2009-2012, to make small-sized cars to be sold on emerging markets.

The investment is due to attract a further 40 car parts producers. Outgoing Prime Minister Calin Popescu Tariceanu last week said that the state must provide EIB guarantees so that the lender can finance projects such as Renault’s Technology Center, the Ford investment, and a possible €5.5 billion investment by Austrian Voestalpine group in southeastern Romania. Renault representatives declined to comment on the information. However, market sources said that the €100 mln loan sought by the French carmaker could be used for the technology center.

“Ford and Renault have liquidity problems, as do many other producers, and because an EIB loan is less costly it is natural that they want such a loan. Funds requested by Renault will definitely be allocated for the Titu project,” sources said.

“We believe that the Ford project will be reduced, but because some investments have already been made, it is likely they still need the €400 million to modernize the production lines,” sources added.

Carmakers worldwide are facing financial problems, following a sharp decline in demand for cars. Producers Ford, Chrysler and General Motors recently asked for $34 million in aid from the U.S. government, and have been turned down. However, Ford officials said their European and U.S. branches operate independently.

Crisan stressed that Ford plans for Romania remain unchanged and that production will begin in Craiova next year with the Transit Connect model. “Furthermore, we will keep preparing the plant for new models, which we plan to produce in Craiova in the coming years,” she said.