No smooth road ahead as carmakers see falling sales
Source: Agencies |
March 5, 2012, Monday
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Print Edition
Print Edition
AS automakers prepare to roll out new models this week at the Geneva Auto Show, one of the major events in the automotive calendar, they are being forced to fight for a slice of an ever-shrinking European market stricken with austerity and recession.
On top of this, carmakers are also having to confront the uncomfortable fact that a large number of their production lines are lying idle and eating up valuable funds. Industry executives, including Fiat and Chrysler chief executive Sergio Marchionne, have estimated that Europe's car industry has the production capacity to build 20 percent more vehicles than they are currently able to sell, an imbalance that hurts both their ability to compete and their bottom line, especially as European sales continue to tumble.
Fiat, PSA Peugeot-Citroen, Opel, Renault and Ford Europe all are losing money in Europe, even when sales in emerging economies such as China help keep the companies in the black.
"If I could do only one thing, it would probably be to create a flexible work environment to manage supply and demand," Marchionne, who is also chairman of the European Auto Manufacturers Association, said recently in Brussels.
Cars sales in Europe this year are forecast to decline by nearly 5 percent to 12.9 million units, according to the Center for Automotive Research - down from 15.7 million units in 2000.
European auto demand has dried up as consumer confidence buckles under the pressure of government austerity measures, rising and persistent unemployment and the deepening of southern Europe's recession.
Gaining a competitive edge with attractive new models and updated technologies, like those to be showcased by the 260 manufacturers coming to the Geneva event, may be part of the cure. But the tougher medicine will mean taking an ax to European factories - which will lead to job losses.
"There are too many cars, and too many brands making similar cars. There is going to be lots of consolidation in the European market, and closed plants, and consolidation of brands," said IHS Automotive analyst Tim Urquhart.
There has already been a casualty: Saab Automobile filed bankruptcy in January after a two-year effort to revive the distinctive carmaker with one of the strongest brand followings in the industry.
On top of this, carmakers are also having to confront the uncomfortable fact that a large number of their production lines are lying idle and eating up valuable funds. Industry executives, including Fiat and Chrysler chief executive Sergio Marchionne, have estimated that Europe's car industry has the production capacity to build 20 percent more vehicles than they are currently able to sell, an imbalance that hurts both their ability to compete and their bottom line, especially as European sales continue to tumble.
Fiat, PSA Peugeot-Citroen, Opel, Renault and Ford Europe all are losing money in Europe, even when sales in emerging economies such as China help keep the companies in the black.
"If I could do only one thing, it would probably be to create a flexible work environment to manage supply and demand," Marchionne, who is also chairman of the European Auto Manufacturers Association, said recently in Brussels.
Cars sales in Europe this year are forecast to decline by nearly 5 percent to 12.9 million units, according to the Center for Automotive Research - down from 15.7 million units in 2000.
European auto demand has dried up as consumer confidence buckles under the pressure of government austerity measures, rising and persistent unemployment and the deepening of southern Europe's recession.
Gaining a competitive edge with attractive new models and updated technologies, like those to be showcased by the 260 manufacturers coming to the Geneva event, may be part of the cure. But the tougher medicine will mean taking an ax to European factories - which will lead to job losses.
"There are too many cars, and too many brands making similar cars. There is going to be lots of consolidation in the European market, and closed plants, and consolidation of brands," said IHS Automotive analyst Tim Urquhart.
There has already been a casualty: Saab Automobile filed bankruptcy in January after a two-year effort to revive the distinctive carmaker with one of the strongest brand followings in the industry.
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