Frankfurt - German Chancellor Angela Merkel warned of Asia stealing Germany's lead in car technology as she opened the Frankfurt International Motor Show (IAA) on Thursday, in the midst of the biggest crisis to hit the industry in decades. The focus of this year's fair is the electric car and environmentally friendly technologies such as hybrid power, but much of the talk has been about the problems of an industry bearing the brunt of the economic crisis.
Merkel said it was important to keep up with foreign competition in the race to develop new technologies, in particular the large batteries needed to power electric cars.
"If Asian markets take over the lead role and we lose the upper hand in standardization, then we will also lose the markets," Merkel warned in her opening address.
Stressing the need to maximize Germany's potential as a car nation, Merkel promised to support the industry in the development of new technology.
"We should sit down together after the parliamentary elections (September 27) and discuss which direction to take," she said.
In total, 753 exhibitors are present at the 63rd European car industry showcase - down 30 per cent from 2007.
In her opening address, Merkel also backed the German car industry in its complex discussions with the EU Commission over environmental standards.
"In a free world, it can't be that we prescribe the size of a car," Merkel said of European Union environmental standards which could lead to penalties for cars with high fuel consumption.
"If the producers of large cars did not exist, the innovation in the small ones could not be implemented so quickly," the chancellor added."
The start of the IAA coincided with the news that Germany's third largest car parts supplier, ZF Friedrichshafen, has been granted a 250-million-euro state rescue package, and is cutting 3,500 jobs.
The sale of ailing car manufacturer Opel to Canadian-Austrian car parts supplier Magna caused ripples earlier in the week, when the IAA opened to the press.
Opel union leader Klaus Franz said the workforce opposed the planned shutdown of its Antwerp factory following the Magna takeover. "We will fight against the closure," Franz said at the IAA.
Meanwhile BMW and Volkswagen said they had to reconsider their trading relationship with subcontractor Magna, which was no longer just a supplier but also a competitor.
Car parts suppliers have been particularly hit by the crisis, as the need to invest in new technologies has come at a time when sales have plummeted.
While cash-for-clunkers schemes in Germany and the US have given the industry a short-term boost by encouraging owners to trade in their old cars for new ones, they are also likely to have the effect of reducing car sales in the months to come.
Since the start of the crisis in the car industry, around 50 suppliers have gone bankrupt, according to the German car industry association VDA.
Others, such as Germany's Continental - subject to a takeover by rival Schaeffler that brought the latter to the brink of bankruptcy - are not present at this year's IAA, to save money.
This year, all the major carmakers are showing hybrids which feature petrol or diesel engines mated to electric motors, while the purely electric car has generated the greatest hype.
It will be years however until these technologies become standard, as there are still problems with the batteries, as well as the cost of electric technology.
Environmental groups have accused car manufacturers of paying lip service to sustainable technologies, while cars being produced now still emit what ecologists consider to be too much carbon dioxide (CO2).
Greenpeace activists demonstrated outside the exhibition hall against the German car industry by displaying a 6-metre-high globe flattened by a car. They also unveiled a banner reading: "Frau Merkel: Stop Gas-Guzzlers."
The IAA in Frankfurt is open to the public from September 17-27.
