European Commission grants loans to carmakers

The European Commission said yesterday it had approved Swedish state guarantees for €500 million in loans Volvo Cars is seeking from the European Investment Bank.

Europe's top competition watchdog said that the state aid, which aims to help the company develop environmentally friendly cars, was in line with EU guidelines for providing access to financing in the face of the economic crisis.

"The state guarantees would contribute to Volvo's investment project for environmental-friendly cars without giving rise to any undue distortions of competition," said EU Competition Commissioner Neelie Kroes in a statement.

On March 12, the European Investment Bank granted €3.0 billion in loans to a number of European carmakers, including to Volvo Cars.

But the securing of those loans was dependent on the Swedish government agreeing to act as a guarantor.

Although Volvo Cars spokeswoman Maria Bohlin welcomed the EU approval as "positive" she said that the company "will not have the money today" because talks with government on the guarantees had been on ice since May.

The negotiations are suspended "as long as the question of the car maker's owner has not been resolved", she said in reference to Ford's plans to sell its Swedish brand.