British Auto Industry Opposes EU Rules

Industry leaders are furious that ministers seem willing to implement the "end-of-life vehicles" directive for all cars from next year, when the French and German authorities are delaying the full regime until 2007.

The directive forces manufacturers to pay for new cars' disposal from July 2002 and for old cars from January 2007 but, if the UK imposes it in full next year, loss-making groups would be faced with huge bills.

There are growing fears that MG Rover, the company seeking to finance a new medium-sized model, could be forced into bankruptcy because of the impact the directive will have on its cash flow.

"This is a new company and yet it could be held responsible for all Rovers still on the road; it's a huge liability," industry sources said, amid estimates it could cost well in excess of £200m a year. "The government should be supporting it, not imposing burdens on it."

Along with bigger manufacturers such as Ford and Vauxhall, it is backing the campaign by the Society of Motor Manufacturers and Traders to change government thinking. Ford has estimated that early implementation of the directive could cost it about £800m.

Chris Macgowan, SMMT chief executive, has accused the government of "ignoring the concerns of the UK's largest manufacturing sector" and of burdening it with "a costly and totally impractical liability". Whitehall insists no decisions have been made.

The SMMT says that the costs of recycling should fall not just on manufacturers but on owners, insurance companies and even on finance houses lending money to buy cars. It also says the Treasury should also be charged because of the tax it takes.

The SMMT has estimated the directive could add perhaps £250 to £300 to the cost of a new car. "We know the bill is going to be big; it's just a question of how big," officials said.

In a recent consultation paper the Department of Trade and Industry (DTI) said the total cost to business could be between £161 million and £346 million a year between 2006 and 2015 and £209 million to £438 million thereafter. The directive sets a target of recycling 85% of cars by 2006 and 95% by 2015.

DTI officials say the Dutch experience - they already recycle up to 86% of used cars - would suggest the lower estimate is more likely. The costs of disposal and recycling in Holland are £48 per vehicle, compared with the UK industry's estimate of £138.

The German government's draft legislation for implementing the directive would offer tax-breaks worth DM500m (£160) a year between 2002 and 2007 to offset the cost to manufacturers. This is put at DM800m a year at least from 2007.

UK industry sources believe the government will delay implementation until 2004, not least because so-called treatment centres need to be upgraded substantially. The DTI says there are 3,500 "dismantling" sites - of which 1,500 operate illegally.