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Peugeot sees west Europe market worsening

PSA Peugeot Citroen, Europe’s second-biggest carmaker, warned of a worsening in western Europe’s car market and forecast a 4% decline in vehicle sales for the whole of 2008.

Peugeot, second to Volkswagen AG in passenger car sales in Europe, gave no reasons on Tuesday for its outlook but called the economic environment “tough.” Its shares fell more than 4% to their lowest level in nine years as the auto sector as a whole fell 3.6%, led by a 5.2% fall in Renault. Peugeot’s outlook is in line with comments from consultancy J.D. Power Automotive Forecasting, which said on Friday it expected European vehicle sales to fall 4% in 2008 and 1.3% in 2009, from a previous outlook of a decline of 2.1% for 2008. J.D. Power blamed a “toxic” mix of falling asset prices, slowing economic growth, financial crisis and rising inflation for the deteriorating outlook.

Renault boss Carlos Ghosn said on Saturday he expected a difficult French car market after the summer holidays and said everybody had underestimated the extent of the US recession. Peugeot said in priority growth markets -- the Mercosur area in south America, China, Russia and eastern Europe -- it still expected a double-digit growth rate for the full year. It maintained its target of global consolidated sales growth of around 5% in 2008. This compares to a 4.6% growth in vehicle unit sales and car kits (shipped for assembly in other markets such as Iran) to 1.84 million for the first half while assembled vehicle sales were up 0.5% to 1.7 million units.

 
NOT AS CONFIDENT

Some analysts said prospects could be even worse than Peugeot believes. “We fail to be as confident as the group,” said analysts at brokerage Landesbanki Kepler, noting the French market may soften while rising commodity prices could force carmakers to raise selling prices -- which would depress sales further. Analysts doubt whether the group can reach its 2008 operating margin target of 3.5%. The average expectation of analysts is 3.38%, according to Reuters Estimates.

Germany’s BMW AG said on Monday it had its worst unit sales month in June with a 2.8% world-wide drop. Elsewhere Fiat SpA has said it will temporarily shut factories due to weak sales. Peugeot said registrations fell 3.5% to 1.23 million units in the first half, in a European passenger car and light commercial vehicle market that was down 3%. Over the period, its market share was 14.0% compared with 14.1% a year ago and 13.8% for 2007. It said H1 sales were underpinned by its Peugeot 308 and Citroen C5 models as well as sound sales of the Peugeot 207.

PSA added it would benefit from its leadership in low consumption and low-CO2 emission vehicles. It would also see the full impact of new models such as the Peugeot 308 and 308 SW, the new Citroen C5 in its sedan and Tourer versions and the latest LCV range, with the Peugeot Bipper and Partner and Citroen Nemo and Berlingo. Peugeot shares had dropped 38.4% so far this year by Monday’s close and were trading at 5.25 times expected 2008 earnings -- the lowest multiple of the European major makers. Renault will publish its H1 unit sales on Wednesday. (Reuters)