Britain considers car trade scheme

February 6, 2009

, LONDON, February  6 – Britain said it was considering an incentive for drivers to replace old polluting cars with new ones to help the beleaguered auto industry, as figures showed plunging sales of new cars.

At a summit of business leaders, Business Secretary Peter Mandelson said he was "looking at other countries\’ experience with scrappage schemes", where motorists are paid to trade in their old vehicles for less polluting ones.

Sales of new cars in Britain plunged by more than 30 percent in January as the recession slashed demand for new vehicles, trade data showed on Thursday.

Industry body the Society of Motor Manufacturers and Traders (SMMT) said in a statement that 112,087 new cars were registered in January. That marked a decline of 30.9 percent from the figure for the same month a year earlier.

"There is a clear need to stimulate demand for new vehicles in the UK market," said SMMT chief Paul Everitt in a statement.

Officials at Mandelson\’s business department said no decision had yet been taken on whether to follow Germany, Spain and France in introducing a "scrappage" scheme, saying it was "interesting" but must be properly examined.

"We\’re not yet convinced how a scrappage scheme will provide a stimulus for demand and value for money — but we will continue to assess the evidence on costs and benefits with the industry and others," a spokesman said.

The Financial Times said officials were wary of subsiding foreign car manufacturers, as most new cars bought in Britain are imported.

In another piece of gloomy news for the industry, US car giant Ford announced 850 job cuts in its British operations owing to the "serious economic situation".

Up to 500 of the jobs will be cut by May at its Transit van plant in Southampton, southern England. The other 350 will go through restructuring in other parts of the company in Britain.

Ford also said it would "re-evaluate" a pay deal which had promised workers a 5.2-percent salary increase this year.

"Such a serious step would not normally be contemplated but in the unprecedented circumstances the priority is to ensure a sustainable Ford Motor Company," it said in a statement.

Ford Europe boss John Fleming added: "As demand across the industry continues to fall, we are facing some immediate and major challenges which require us to take decisive action to reduce all our costs."

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