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Carmakers cut output as Europe sales fall 26%

European new car sales dropped by a quarter in November, data showed on Tuesday as more vehicle makers announced output cuts and the Big Three US players waited for the government to throw them a lifeline.

Volkswagen's Spanish car maker Seat and world number two truckmaker Volvo became the latest companies to announce temporary production halts in response to falling sales as the global economic slowdown batters the industry.

Governments are rushing to support car manufacturers struggling to cope with falling sales and difficulties shifting their stocks of unsold vehicles.

On Monday, France said it was ready to take action following a meeting with top industry executives in return for commitment to keep production in the country.

In the US, the Bush administration could act as early as Wednesday to approve an automaker bailout from its bank rescue fund, with conditions likely to reflect at least those approved by the US House of Representatives last week, key lawmakers and other sources said on Monday.

European new passenger car registrations dropped 25.8% year-on-year according to the ACEA industry body on Tuesday, the seventh consecutive monthly drop.

ACEA said the last time registrations fell so notably was in 1999 and in 1993, before EU enlargement, when the data only covered the 15 EU member states plus the European Free Trade Association countries.

November's data referred to the 27 EU member states, plus the EFTA countries and excluded Malta and Cyprus, ACEA said.

In Western Europe, registrations were down 26% to a total of 854,698 new vehicles in November. ACEA said around a million fewer cars were registered in Western Europe in the period from January to November.

In November, Ireland was worst hit, with a 55.9% fall, while Spain's sales fell 49.6%, the UK 36.8% and Italy 29.5%.

Sales in Germany were down 17.7% - the steepest fall since December 2007. France's sales dropped 14.1%.

Among the major European manufacturers, Germany's Volkswagen recorded a 17.4% drop in European sales in November, France's PSA Peugeot Citroen saw a 26.9% fall, Renault 21.8% and Fiat 23.8%.

Separately, Seat said it will further cut production at its main plant in Catalonia in the first half of 2009 in response to diving sales. The maker of the Ibiza and Leon said that between February 2 and June 30 it would halt work at its Martorell plant near Barcelona for between seven and 29 days on various production lines.

And the decline is not just in passenger cars as truck sales also fell, leading Volvo to stop production for 20 to 25 days in the first quarter of 2009. (Reuters)