18 February 2012

Car Subsidies

I just read this headline regarding a financial package given by the Welsh Government to secure the future of a car parts factory: 300 jobs saved in £12.4m boost for Llanelli factory. The article said: "The £3.4 million package has in turn led to its parent company investing a further £9 million, safeguarding a total of 302 jobs, including an increased number of permanent positions at the plant. The investment also enables the manufacturer to invest in new high-tech robotic equipment to supply automotive components.."

I have avoided naming the company involved because I am simply using this as an example. There is nothing special about this company doing what it did. Car making and parts supply firms are always looking to see if they can get public funding. They often play a plant in one country against another(s) with a veiled threat to close a plant if money is not forthcoming.

Still, I do not personally agree with the practice as it puts workers under stress and costs tax payers to support investment in plant machinery or the like, something the business should be doing for itself. However, you have to play the game or lose out.

Holding a gun to the head of a region - so to speak - to get money out of them, just doesn't sit well with this writer. Then if one company does it, then others feel they have to also, in order to remain competitive. I guess that's capitalism for you.

Then you get countries like China, that use heavy import duties to force all cars and parts to be made locally. That effectively subsidises the local product in another way. One thing the business world doesn't provide is a level playing field.

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