Volkswagen became the first German carmaker to seek to tap the country’s €500bn ($650bn) government-backed banking rescue plan on Tuesday, highlighting the global spread of the auto industry’s woes. Europe’s largest carmaker said its affiliates, Volkswagen Bank and Volkswagen Financial Services, had applied for state guarantees to cover loans for refinancing. Until recently, VW had shown more resilience than its rivals as consumers turned to more fuel-efficient cars. Bernd Osterloh, head of VW’s works council, said Tuesday the company would miss its growth targets for the coming two years. Amid spiralling refinancing costs for carmakers worldwide, BMW and Daimler recently issued bonds with spreads of more than 500bp above the rate for inter-bank lending. VW covers 30-40% of its refinancing needs via bond issues. With a guarantee from the bail-out scheme, which would cost the company about 100bp, it could benefit from more affordable refinancing rates when it issues bonds.

This entry was posted by Gwen Robinson on Wednesday, December 10th, 2008 at 5:38 and is filed under Capital markets. Tagged with volkswagen. Edit this entry.