According to the European Automobile Manufacturers Association, new car passenger registration declined by 8.9% in August throughout Europe. Regarding the first eight months of the year, the downturn reached 7.1% as the EU registered 8,591,968 new cars.
While the continuous fall in southern member states’ car sales should hardly surprise anyone, the Continent-wide slump now appears to have begun moving north. Germany saw its demand contract by 4.7% and – according to more up-to-date data from the country’s Federal Motor Transport Authority (KBA) – the number of registrations fell another 11% in September against the same month last year. For the first six months of this year, car sales in Germany had managed to steer around the roadblocks hitting other European markets, but now the country’s surprising resistance to the ongoing crisis in the European automotive industry has come to an end.
European car sales fell relatively slowly. In the EU-27 and EFTA countries, 722,483 new passenger cars were registered in August 2012, compared to 829,083 three years earlier. The American market fell from a peak of more than 17 million vehicles a year to barely 10 million by the time it bottomed out. But in the United States, the industry moved aggressively to respond, largely through factory closings and job cuts. General Motors and Chrysler both emerged from their own 2009 bankruptcies by shutting down lots of assembly and component plants. By comparison, European automakers have done little more than sounding the alarm.
Even before the sovereign debt crisis began, Europe was laden with overcapacity. By some estimates it now has at least eight more assembly plants than are needed. Most industry observers don’t believe the situation in Europe will improve in the near future, with no sales improvement expected before the end of 2013. Indeed, many have reached a consensus that the European automobile market needs to undergo fundamental restructuring, focused primarily on eliminating the overcapacity that has dogged the industry in recent years.
Some carmakers are addressing the problem already. Fiat did shutter one grossly underutilized facility in Sicily and is also planning to slash 110 out of a total of 550 managerial jobs across Europe. Peugeot is closing a factory near Paris and cutting 8,000 jobs, according to a recent Bloomberg report, and Opel is widely expected to close its plant in Bochum by 2016.
“I’ve never seen it this bad,” Sergio Marchionne, head of Italian carmaker Fiat, told the New York Times in a summer interview. Referring to the discounts that many manufacturers have been offering, he added: “It’s a bloodbath of pricing and it’s a bloodbath on the margins.” Part of the problem, Marchionne and others complain, is that German manufacturers have resisted calls for a unified response to the European automotive crisis, especially Volkswagen, which has managed to sidestep the worst of the situation — and which has declared its intent to become one of the world’s largest automakers, if not the top-seller, before the end of the decade.
The automotive industry in Germany remains much stronger than elsewhere in Europe, though. Luxury brands continue to do well, with both Porsche and Audi registering increased sales over the first nine months of the year. Overall, some 2.4 million cars were registered in Germany from January to September, a slight drop over the same period last year. Many German brands have been able to rely on strong sales in both the United States and Asia. However, as the situation worsens, some automakers are being forced to act even if there are dangers associated with moving unilaterally.
Opel is arguably the most troubled of the European marques with various analysts forecasting that losses for the year will come to between $1.5 billion and $2 billion. For its part, American owner GM continues to put together a rescue plan, that will see both the addition of new products and the contraction of production and manpower. But the latter goal is limited by government regulations and union contracts, making it extremely difficult to reduce capacity.
Mercedes and Porsche both recently announced that, after strong first halves for 2012, they were forced to revise downward projections for the year. Germany’s Volkswagen is the only major European mass-market manufacturer to have thus far avoided significant problems from the downturn on the continent – largely by including Porsche results in its corporate numbers. The company has benefited from both a German market that has been strong until now and its significant share in markets abroad such as China and Brazil. “Despite all of the headwinds, we are sticking to our ambitious goals for 2012,” CEO Martin Winterkorn said last week at the Paris Motor Show. Still, Tuesday’s numbers showed that VW’s September sales in Germany had dropped by 20% relative to September 2011.
While Opel has emergency plans to survive expected upcoming lean years, Daimler is planning to hire. Even if the company has registered a 1.7% fall in new car sales – largely due to plummeting demand for Smarts – the German automaker has denied plans to cut production at its largest car plant, Sindelfingen. Earlier, the carmaker had announced plans to cut production at the plant due to decline in sales of its Mercedes-Benz cars in Europe and China. Excessively strained relations at the plant regarding shifts for Q4 2012 had caused the carmaker to call in mediators to resolve the dispute. But Daimler’s CEO Dieter Zetsche said that the group is preparing for challenging situations in Europe and China, with plans to increase employee count by 250 by the end of 2014.
France-based automobile company Renault is considering plans to completely shut down its factories as a result of the downturn in the European automobile market, reports Reuters. CEO of the company, Carlos Tavares, believes Renault has a competitiveness problem in Western Europe and France. Tavares said the company could possibly disappear “in its current form” if it is not competitive in its home market, and also confirmed that Renault is not looking to cut jobs in France at this stage.
Rival French carmaker PSA Peugeot Citroen will stop production in Slovakia for 21 days in the fourth quarter due to weak demand, the Slovak unit said. Peugeot, which is losing €350 on every car sold in Europe and which plans to cut more than 10,000 jobs, will close one assembly plant and shrink another at its plant in the western Slovak town of Trnava where, it makes the Peugeot 207 and Citroen C3 Picasso models. “Demand for new cars in Europe has been falling continuously over the past 11 months,” PSA Peugeot Citroen Slovakia said in an emailed statement. The company has already shut production in Slovakia for 12 days this year, but said no job cuts were planned there.