Merkel Coalition Signals No Rush on Cash-for-Clunkers Plan

(Bloomberg) -- Germany needs several more weeks to decide on a cash-for-clunkers program to counter a slump in car sales, according to Finance Minister Olaf Scholz.

While Chancellor Angela Merkel and auto industry executives are holding talks this week, a decision will only be made at a meeting in late May at the earliest, Scholz said on an ARD television panel late Sunday. “I've come to an agreement about this with the chancellor, so that we both see it that way,” he said.

Germany's car industry is working on proposals to encourage people to trade in their cars for new models as a sales slump risks choking off production restarts at factories in Europe's biggest economy.

Merkel will hold discussions with the executives of Volkswagen AG, BMW AG and Daimler AG in the chancellery on Tuesday to discuss aid for carmakers hit by the economic fallout of the coronavirus. During the financial crisis a decade ago, the German leader introduced a cash-for-clunkers program that boosted car sales.

A survey published Monday highlighted the difficulties carmakers are facing because of the pandemic. An index compiled by the Ifo economic research institute that tracks the health of the industry collapsed to -85.4 points in April, from -13.2 in March. That was the biggest monthly decline and the lowest reading since Ifo started a combined survey for reunited Germany after 1990.

“We have never recorded such bad numbers for this key sector,” Ifo survey head Klaus Wohlrabe said.

Scholz, a Social Democrat, said that the German government will meet “at the end of May, or at the beginning of June” to discuss a comprehensive industrial recovery program that would include German carmakers. Any companies that receive state aid should be prohibited from paying dividends, he said.

Bavarian state leader Markus Soeder, whose CSU party is part of Merkel's coalition government, said the program should be linked to efforts to tackle climate change and called for incentives for buyers of electric vehicles. “This can't be a normal cash-for-clunkers program,” Soeder said on the same ARD show.

The head of the VDIK industry lobby, which represents international carmakers in Germany, said Monday a short-term program to help companies is “unavoidable” as a pickup in the market is not yet in sight. The measures must take effect quickly and support sales of low-emission vehicles, VDIK President Reinhard Zirpel said in an emailed statement.