Sweden, which holds the EU presidency, should lead governments in setting up a EUR3bn (US$4.3bn) loan facility for Europe’s automotive suppliers who face bankruptcy as vehicle production falls in the current economic crisis, according to trade group CLEPA.

Spokesman Wolfgang Lange said CLEPA, which represents around 3,000 suppliers, was seeking a pan-European solution. He added that three in 10 suppliers were facing severe financial difficulties and one in 10 could go bust by the end of the year. The sector has already seen 200 bankruptcies.

Earlier this week Faurecia predicted a slow recovery and Continental said the business environment continued to be a challenge.

Lange said: “”We need a loan facility to forestall more bankruptcies. It is a very serious situation, it should not be under-estimated. We have pitched for a EUR3bn loan facility or a guarantee fund.”

He added that suppliers face a liquidity squeeze in the summer as banks restrict credit lines and factories shut down for the summer while holiday salaries have to be paid.