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Europe's carmakers flounder
Source: Agencies |
September 28, 2012, Friday
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EUROPEAN carmakers were preparing for a future of labor strife, lower sales and more financial uncertainty as they set out their latest models at the Paris Auto Show yesterday.
France's Peugeot, Citroen and Renault see the event as a chance to show off their newest cars and prototypes to a hometown crowd, but European executives seemed just as preoccupied with the factories they believe must close to cope with a shrinking market.
The latest data show new passenger car registrations in the European Union declined 8.9 percent in August, the 11th straight monthly decline. And the industry is bloated - there are too many factories to manufacture a dwindling number of cars.
Bailouts from European governments failed to force the carmakers to overhaul their businesses, unlike in the US, where 18 car factories were closed after the US government bailed out GM, Chrysler and some suppliers, according to industry analyst Laurent Petizon of Alix Partners. Since 2010, only three European factories have closed.
"The problem is that there hasn't been a profound restructuring," Petizon said.
He argues that the recent years' financial turmoil in Europe is not the cause of the problems afflicting the continent's carmakers. "The crisis only brought into focus the problems that were there," he said.
Most European countries have strong labor protection that can delay layoffs for months after they're announced. Governments are reluctant to facilitate job cuts at a time when unemployment is already in the double-digits in many countries, including France, Italy and Spain.
The consequence, however, is that the automotive sector, one of the continent's most important industries, keeps suffering.
PSA Peugeot Citroen will close one factory in France this year, but the plan to lay off 8,000 workers has run into opposition from France's powerful unions and the government.
The company's chief executive, Philippe Varin, insisted yesterday that the only solution is to close plants, no matter how politically difficult.
"This situation is not tenable over the long term," he said.
Sergio Marchionne, CEO of Fiat and Chrysler, has long advocated that the EU coordinate such decisions and help carmakers restructure - since individual countries tend to fight just to save plants on their home turf.
France's Peugeot, Citroen and Renault see the event as a chance to show off their newest cars and prototypes to a hometown crowd, but European executives seemed just as preoccupied with the factories they believe must close to cope with a shrinking market.
The latest data show new passenger car registrations in the European Union declined 8.9 percent in August, the 11th straight monthly decline. And the industry is bloated - there are too many factories to manufacture a dwindling number of cars.
Bailouts from European governments failed to force the carmakers to overhaul their businesses, unlike in the US, where 18 car factories were closed after the US government bailed out GM, Chrysler and some suppliers, according to industry analyst Laurent Petizon of Alix Partners. Since 2010, only three European factories have closed.
"The problem is that there hasn't been a profound restructuring," Petizon said.
He argues that the recent years' financial turmoil in Europe is not the cause of the problems afflicting the continent's carmakers. "The crisis only brought into focus the problems that were there," he said.
Most European countries have strong labor protection that can delay layoffs for months after they're announced. Governments are reluctant to facilitate job cuts at a time when unemployment is already in the double-digits in many countries, including France, Italy and Spain.
The consequence, however, is that the automotive sector, one of the continent's most important industries, keeps suffering.
PSA Peugeot Citroen will close one factory in France this year, but the plan to lay off 8,000 workers has run into opposition from France's powerful unions and the government.
The company's chief executive, Philippe Varin, insisted yesterday that the only solution is to close plants, no matter how politically difficult.
"This situation is not tenable over the long term," he said.
Sergio Marchionne, CEO of Fiat and Chrysler, has long advocated that the EU coordinate such decisions and help carmakers restructure - since individual countries tend to fight just to save plants on their home turf.
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