F&I Management & Training

Germany has tripled the size of its car-scrapping scheme, which rewards trading in old cars for new ones. The government will raise its budget from 1.5bn to 5bn euros ($6.6bn; £4.5bn), aiming to cover up to two million cars instead of 600,000. The scheme has been very popular, driving German car sales to their highest level for 10 years last month. But the news came as parts firm Karmann became Germany's biggest car company to fall victim to the economic crisis. Karmann, which specialised in car bodies and built the classic Volkswagen Karmann Ghia two-seater convertible, filed for insolvency on Wednesday, according to a court in the north-western city of Osnabrueck. Another car parts firm, Schaeffler Group, which has been burdened with debt since taking over rival Continental earlier this year, announced on Tuesday that it had secured a 1bn-euro credit line from its banks. Exports blow Under the car-scrapping scheme, German consumers are paid 2,500 euros for turning in a car which is at least nine years old in exchange for one no more than one year old. German Chancellor Angela Merkel's spokesman Ulrich Wilhelm said the scheme was being expanded "in view of the strong demand". The government has previously said it will expire at the end of the year. Critics of the scheme have alleged that instead of boosting economic demand, it merely redistributes it, as consumers spend money on cars that they would otherwise have spent on other items. "Now people are buying more cars, but fewer sofas or flat-screen televisions," Wolfgang Franz, head of the government's independent panel of economic advisers, told ZDF television. The German car industry, like those in other countries across the world, has been struggling to cope with a dramatic slump in sales during the economic downturn. Germany's overall economic health took another knock on Wednesday, with the release of figures showing the country's exports had fallen for the fifth month in a row. Exports in February were a record 23.1% lower than in the same month a year earlier, said the Federal Statistics Office.

DATED: 08.04.09

FEED: AW